To link to the entire object, paste this link in email, IM or documentTo embed the entire object, paste this HTML in websiteTo link to this page, paste this link in email, IM or documentTo embed this page, paste this HTML in website

Performance audit of the Arizona Department of Transportation

Performance audit of the Arizona Department of Transportation

Performance Audit of
The Arizona Department of Transportation
A Review of the Oversight and Management of the
Maricopa County Regional Freeway System
June 2005
455 Capitol Mall•Suite 700•Sacramento, California•95814 •Tel 916.443.1300•Fax 916.443.1350
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
June 30, 2005
The Honorable Ken Bennett, President
Arizona State Senate
The Honorable Jim Weiers, Speaker
Arizona House of Representatives
Members of the Arizona Legislature
The Honorable Janet Napolitano, Governor
Mr. Victor Mendez, Director
Arizona Department of Transportation
Transmitted herewith is a report of the Auditor General, A Performance Audit of the Oversight
and Management of the Maricopa County Regional Freeway System. This audit was
conducted by the consulting firm Sjoberg Evashenk Consulting under contract with the Auditor
General and was in response to the requirements of A.R.S. §41-1279.03.
Responses to the audit from the Department of Transportation, Maricopa County Association
of Governments, and the State Transportation Board can be found at the end of the audit
report. As outlined in their responses, the parties agree with all of the findings and plan to
implement all of the recommendations addressed to them.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on July 1, 2005.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
cc: Maricopa Association of Governments
State Transportation Board
June 24, 2005
Ms. Debra Davenport
Auditor General
Arizona Office of Auditor General
2910 N. 44th Street, Suite 410
Phoenix, Arizona 85018-7243
Dear Ms. Davenport:
Sjoberg Evashenk Consulting is pleased to submit our final report for the Performance
Audit of the Arizona Department of Transportation: A Review of the Oversight and
Management of the Maricopa County Regional Freeway System. This report assesses the
Arizona Department of Transportation’s (ADOT) management over the planning and
construction of the Regional Freeway System and addresses issues raised by interested
parties and answers questions mandated by Arizona statutes.
Our review concludes that past performance indicates that ADOT will likely complete the
remaining Regional Freeway System projects by the end of 2007, the statutorily
mandated deadline. Specifically, since 2000, ADOT has demonstrated the ability to meet
targeted completion dates for various phases of highway construction, and has delivered
these projects within a reasonable deviation from their budgets. However, we did find
that the collaborative oversight of the Regional Freeway System by ADOT, the State
Transportation Board, and the Maricopa Association of Governments should be
broadened to include tracking more historically-based performance and budget measures,
and in fact, project data are now being captured that can be employed for such reviews.
Moreover, we recommend that these advances be transitioned to Proposition 400 projects
as ADOT, the State Transportation Board and the Maricopa Association of Governments
begin to implement this measure.
We appreciate the opportunity to have served the Office of the Auditor General and it has
been our pleasure to work with you. We also appreciate the cooperation we received
from all those who assisted us throughout our review including ADOT, the State
Transportation Board, the Maricopa Association of Governments, and your staff.
Respectfully Submitted,
Kurt R. Sjoberg
Chairman
sjobergevashenk
i
Table of Contents
List of Figures and Tables .................................................................................ii
Executive Summary............................................................................................1
Chapter 1: Introduction and Background.................................................5
Chapter 2: ADOT’s historical performance indicates that ADOT is likely
to complete the remaining Accelerated Program projects by
the end of 2007.......................................................................15
Chapter 3: ADOT’s, MAG’s, and STB’s efforts at analyzing the RFS
program should be broadened .............................................30
Chapter 4: New phase of RFS development and construction offers
opportunities to apply lessons from the Accelerated
Program ..................................................................................37
Chapter 5: Conclusions and Recommendations ...................................39
Appendix A: Response to Stakeholder Issues ..........................................42
Appendix B: Status of 2000 Performance Audit Recommendations.......50
Appendix C: Regional Freeway System Program Features .....................52
Appendix D: Comprehensive Listing of Projects......................................53
Response to the Audit from ADOT..................................... R-1
Response to the Audit from STB........................................ R-4
Response to the Audit from MAG....................................... R-6
sjobergevashenk
ii
List of Figures and Tables
Figure 1: Accelerated Program, January 2000 Life Cycle
Certification ..............................................................................6
Figure 2: Accelerated Program Funding Sources 2000-2004...............7
Figure 3: Accelerated Program, January 2005 Life Cycle
Certification ............................................................................16
Figure 4: Status of Accelerated Program Miles by Stage, as of
January 2005 ..........................................................................17
Figure 5: Total Available Funding through 2007 (in thousands)........20
Table 1: Status of Accelerated Program Miles by Corridor, as of
January 2005 ..........................................................................17
Table 2: Significant Vacancies in Critical Department Groups ........28
sjobergevashenk
1
Executive Summary
In 1985, Maricopa County voters approved a sales tax initiative that authorized the
Arizona Department of Transportation (ADOT) to embark on a 20-year program to build
a comprehensive network of regional freeways in the Phoenix metropolitan area. After
several earlier plans to manage and deliver the proposed network produced less than
hoped for results, in 1999 the Governor, State Legislature, ADOT, the Maricopa
Association of Governments, and the State Transportation Board worked together to
develop the “2007 Accelerated Program” which revised the scope, funding streams and
timeline of the proposed network. In 2000, the Accelerated Program was implemented,
with plans to complete the network by the end of 2007.
In 1992, additional legislation also set into place a requirement for regular performance
audits of the Maricopa County Regional Freeway System (RFS). This report addresses
the findings of the fourth and final audit of the RFS program conceived and funded in
19851. The Office of the Auditor General contracted with Sjoberg Evashenk Consulting,
Inc., to fulfill this requirement in 2005. The objective of the 2005 audit is to assess
ADOT’s management performance of the RFS, review specific areas of concern
identified by interested parties, address statutorily mandated questions, and recommend
ways to improve ADOT’s efficiency and effectiveness in fulfilling its overall program
responsibilities through the life of the existing transportation excise tax.
ADOT’s historical performance indicates that ADOT is likely to complete
the remaining Accelerated Program projects by 2007.
As of January 2005, the Accelerated Program was approximately 78 percent complete.
ADOT’s performance at managing the funding, design, engineering, right-of-way
acquisition and construction of the network, or the Maricopa Regional Freeway System
(RFS) since 2000 through January 2005, indicates that the department will most likely
complete the remaining 22 percent by the close of calendar year 2007. Specifically, we
found:
o ADOT’s performance since 2000 supports the likelihood of completing the
Accelerated Program on schedule
Since implementation of the Accelerated Program in 2000, ADOT has generally
demonstrated the ability to meet targeted completion dates for various phases of
highway construction, and within a reasonable deviation from budget.
1 Subsequent sales tax initiatives and the RFS programming that they enable are subject to separate audit
requirements.
sjobergevashenk
2
o Available funding appears sufficient to meet the remaining construction needs
As of January 2005, the total projected costs remaining for the program comprise
only 93 percent of the total remaining funding.
o ADOT’s project management procedures and processes, while they could be
better documented, are sound and functioning well
RFS design and construction is accomplished through a project management
structure which ensures a “cradle-to-grave” approach, enabling each phase of
highway design and development to inform every other appropriately, and in
accordance with best practices within the transportation industry. Further, the
department’s controls for budget and timeline changes are appropriate, though
documentation of key project developments could be improved.
o A more absolute conclusion on the likelihood of completion is impossible
Since unpredictable delays and cost overruns are not atypical of large-scale
construction projects, we cannot conclude unequivocally that the RFS will be
completed on time. Further, the Accelerated Program may face some tight
timelines as it nears completion with significant staffing vacancy issues.
ADOT’s, MAG’s, and STB’s efforts at analyzing the RFS program should
be broadened.
Oversight of the RFS is provided collaboratively by the State Transportation Board
(STB), Maricopa Association of Governments (MAG), and ADOT2. Collectively, these
organizations share (1) an explicit responsibility to deliver the Accelerated Program on
time and within the available funding, and (2) an implicit responsibility to assure the
RFS’s cost-efficiency and effectiveness. This audit recognizes the success of ADOT,
MAG and STB in serving the first responsibility of bringing the RFS near completion on-time
and on-budget. Keeping this success in mind, we also identified several
opportunities to help meet ADOT’s goal of “excellence and continuous improvement” in
achieving cost-efficiency and effectiveness. Specifically, we believe:
o Oversight processes should include historical review of projects’ progress when
evaluating budgetary or timeline revisions
The types of information presented in support of proposed project and program
changes to the Accelerated Program lack historical context—some of which is not
available for projects initiated in the 1980s or early 1990s. However, even for
projects initiated since the establishment of the Accelerated Program, decisions to
approve proposed changes are made based upon the support for the current
2 The Citizens Transportation Oversight Committee also has review and advisory responsibilities for
oversight of the RFS, though it does not have any authority to approve or disapprove ADOT plans or
proposals.
sjobergevashenk
3
proposal without reference to original budgets and estimated completion dates, or
any other incremental changes previously approved to the original budgets and
estimated completion dates. Only the most recently approved budget and
completion estimates are compared to the newly proposed changes. As a result,
the RFS oversight and management agencies may be missing useful evaluative
information regarding opportunities to improve RFS estimating processes, initial
considerations in design, and other processes with the potential to positively affect
cost-efficiency and effectiveness. Taking the opportunity to hold the program to
account for, expecting explanations of, and conducting analysis of historical
incremental and cumulative budget and timeline deviations would create
opportunities to learn how to improve delivery of the RFS projects.
o Program and project data, currently residing in decentralized systems, should be
consolidated
When the RFS was initiated in the 1980s and into the early 1990’s, ADOT’s
information technology systems did not capture early project budgets and
estimated timelines in a manner to make them available for analytical purposes
now. Since the mid-1990s, however, ADOT has collected most of the types of
data necessary for the historical review of changes in budget, scope and timeline
that would make a historical review of the cost-efficiency and effectiveness of
many of the more recently-initiated Accelerated Program projects possible.
Unfortunately, at this point, various pieces of the overall picture for both
individual projects and the program overall reside in decentralized databases and
require manual manipulation and analysis to study. It will be necessary to
consolidate Accelerated Program and project data to ease the staff analysis and
preparation of such historical review for both oversight and managerial purposes.
New phase of RFS development and construction offers opportunities to
apply lessons from the Accelerated Program
In November 2004, Maricopa County taxpayers passed Proposition 400, which extends
Maricopa County’s transportation excise tax for another 20 years beginning in 2006 and
initiates a new phase of RFS development and construction, including new highway
corridors, High-Occupancy Vehicle lanes, other lane expansions, and new traffic
interchanges.3 ADOT, MAG and the STB should bring forward the successful practices
and policies developed during the Accelerated Program and take the opportunity to apply
lessons learned about ways to further improve RFS management and oversight presented
in this report.
3 Proposition 400 also includes proposals for new non-RFS initiatives outside of ADOT management,
including an ambitious arterial and streets development and improvement program, and new light rail
development.
sjobergevashenk
4
Conclusions and Recommendations
Overall, the conclusions drawn from this audit are largely positive. The
recommendations primarily focus on opportunities for improvement in support of the
strategic values of “excellence and continuous improvement.” Further, they are made
with the expectation that their implementation offers benefit not only to the Accelerated
Program completion, but to implementation of Proposition 400 initiatives.
Recommendations for ADOT:
1. Continue to improve and implement successful project management practices.
2. Develop and implement a memorialization and retention policy for documentation
of approved project changes and key project decisions, including project file
checklists.
3. Develop a single database, or a system of coordinated databases, which is capable
of generating reports that track, present, and explain individual projects’ and the
overall program’s history.
Recommendations for ADOT, MAG and STB:
4. Require comparisons of historical budgets and estimated completion dates when
evaluating newly proposed changes as well as other useful evaluative data.
5. Define key performance indicators for the RFS program that will help ADOT,
MAG and STB recognize trends of performance.
6. Require separate tracking, monitoring, and reporting on the completion of the
Accelerated Program from new initiatives resulting from the passage of
Proposition 400.
sjobergevashenk
5
CHAPTER 1
Introduction and Background
Maricopa County Regional Freeway System (RFS) and the
Accelerated Program Life-Cycle
In October 1985, Maricopa County voters approved a 20-year, one-half cent sales tax
increase to fund a plan for developing approximately 230 miles of freeways and
expressways for metropolitan Phoenix — or, the Maricopa County Regional Freeway
System (RFS). However, in 1991, the revenue generated from the sales tax increase
appeared to be insufficient to complete the plan within the original 20-year time-period,
only 16 miles of the system had been completed in six years, and costs were escalating.
The Arizona Auditor General contracted a performance audit of the RFS and the resulting
report made numerous recommendations to improve the Arizona Department of
Transportation’s (ADOT) effectiveness in fulfilling its regional freeway program
responsibilities. Nonetheless, RFS progress continued to falter. In 1995, the governor
altered the original plan to reduce the scope of the overall program. In 1996, after the
Governor's Plan was adopted, MAG and ADOT jointly developed a plan that
incorporated additional funding and moved the RFS completion date to 2014. The new
program, as approved by the MAG Regional Council, extended the HURF allocation to
RFS and the allocation of additional MAG Federal funds to the RFS. Additionally, the
new plan scaled back the RFS system by 37 percent from 230 miles to 144 miles of
freeway. Other reductions included the elimination of certain highway lighting and
landscaping projects.
The 2007 Accelerated Program Life-Cycle
By 1999, the RFS was turning around—58 miles of the RFS had been completed. A
cooperative effort among ADOT, the Maricopa Association of Governments (MAG), the
governor, the legislature, and the business community reenergized the plan. Specifically,
they adopted the Accelerated Program—a new plan to speed RFS completion by seven
years from the expected finish in 2014 up to 2007, made possible by innovative
financing, earlier availability of funds, and increased highways monies. Figure 1,
“Accelerated Program, January 2000 Life Cycle Certification” displays a map of the
planned corridors and projects for the Accelerated Program as of January 2000. (Sections
and projects due to begin construction or yet to complete construction are indicated by
leading lines or brackets and a ratio such that the numerator indicates the estimated year
of completion and the denominator indicates the anticipated costs in millions.)
sjobergevashenk
6
Figure 1. Accelerated Program, January 2000 Life Cycle Certification
Source: Arizona Department of Transportation, January 2000
Typically, Arizona’s highway construction is planned, developed and implemented in
accordance with a long-range transportation plan that is updated every five years. To
help ADOT and MAG maintain a realistic plan for the Accelerated Program’s
construction schedule, predicated upon available funding, it was programmed on a “Life-
Cycle” basis. In the case of the RFS, the “Life-Cycle Program” concept refers to a
programming approach that includes the usual five-year programming period and also
recognizes the need to forecast and allocate funds through the full life of major funding
sources. As a result, the Accelerated Program Life Cycle was defined to cover the full
period of the Proposition 300 one-half cent tax extending through fiscal year 2006,
construction concluding by the end of 2007. Specifically, the projects of the Accelerated
Program are tracked through 2007 in accordance with the plan specified in 2000, and the
funds necessary to ensure completion are forecasted and allocated accordingly. In
addition, the semi-annual recertification of the Accelerated Program and its progress, in
accordance with its Life Cycle, enables periodic reports to the public on the Accelerated
Program’s progress.
sjobergevashenk
7
Accelerated Program Funding
Since January 2000 through December 2004, the Accelerated Program averaged $639
million a year in new revenues, or approximately $3.2 billion for the entire period.
Although Accelerated Program projects are funded by a variety of sources, approximately
74 percent of the funding comes from the Maricopa County transportation excise tax
(RARF), the Highway Users Revenue Fund (HURF), and the proceeds from innovative
bonds made possible by the dedicated RARF and HURF funding. Additional funding
measures such as the State Infrastructure Bank loans (HELP) and Grant Anticipation
Notes (GANs) comprise approximately 14 percent of available monies. This is displayed
in Figure 2, “Accelerated Program Funding Sources.” More detailed descriptions of each
of the funding sources follow.
HURF
10%
RARF
41%
Bond Proceeds
23%
Other
6%
Federal Aid
6%
HELP/GANS Loans
14%
Figure 2. Accelerated Program Funding Sources 2000-2004
Source: Arizona Department of Transportation, January 2005
The Maricopa County Transportation Excise Tax/Regional Area Road Fund (RARF) –
The one-half cent sales tax approved by the Maricopa County residents in 1985,
specifically for building the Regional Freeway System, flows into the Regional Area
Road Fund (RARF). This excise tax would have ended on December 31, 2005, except
for a recently passed extension through December 31, 2025. Over the past five years,
RARF revenues have averaged approximately $263 million a year.
The Highway Users Revenue Fund (HURF) – Under provisions of Arizona Revised
Statutes Title 28, Sections 6538 and 6540 and State Transportation Policy, Maricopa
County receives a portion of state revenues generated from motor fuel taxes and vehicle
registration fees for the construction of controlled access freeways in the county. In
addition, the State Transportation Board may allocate portions of the State HURF funds
for the Regional Freeway System. Over the past five years, the Accelerated Program’s
sjobergevashenk
8
portion of HURF (and State HURF) revenues has averaged approximately $65 million a
year.
Bond Proceeds – The State Transportation Board (STB) has the authority to issue bonds
backed by a pledge of transportation excise tax revenues or highway user revenues.
Because legislation stipulates how much can be outstanding at any one time, ADOT
determines if outstanding bonds are within the legal limits and if new bonds can be
issued. STB issues bonds as needed to complete the Regional Freeway System. Between
January 2000 and December 2004, bond proceeds averaged approximately $144 million a
year.
Highway Expansion and Extension Loan Program (HELP) — Authorized by Congress
in 1995, State Infrastructure Banks (SIB) operate much like private banks by providing
financial assistance in the form of loans or credit enhancement for transportation projects.
Arizona’s SIB, the HELP fund, was established in 1998. In 1999, Senate Bill 1201 set
total HELP funding at approximately $370 million. STB is also authorized to provide
loans from the HELP fund. Since 2000, the Accelerated Program has averaged
approximately $44 million a year in HELP loan funding.
Grant Anticipation Notes (GANs) — STB also has the authority to issue GANs which
are notes backed by a pledge of future federal funds. This allows the state to use federal
funds earlier and in advance of when they are actually earned, and thus allowing the state
to start projects sooner. This practice of spending money not yet earned through the use
of the GANs is both permissible and encouraged by Federal Highway Administration.
During the past five years, the Accelerated Program has averaged approximately $44
million a year in GANs funding.
Federal Funds — Both ADOT and MAG receive direct federal assistance monies.
ADOT federal aid includes Surface Transportation Projects, or STP, funding which
ADOT assigns directly to eligible projects. MAG receives federal aid including STP
funds but Congestion Mitigation of Air Quality funds as well and can allot up to 70
percent of its federal funding to ADOT transportation projects. Since 2000, the federal
funding of the program has averaged approximately $37 million a year.
Other Income — A portion of the Regional Freeway System is also funded by
miscellaneous income such as interest income, third party billing, and proceeds from
disposition of excess right of way. Third party billing refers to payments from other
entities for various activities of a project like cities’ funds to add enhancements to a
specific project. Other income averaged approximately $41 million a year between
January 2000 and December 2004.
sjobergevashenk
9
The Future of the RFS — the Proposition 400 Excise Tax Extension
In November 2004, Maricopa County voters passed Proposition 400, a 20-year extension
of the transportation excise tax to take effect in January 2006. The extension enables
significant new transportation planning in Maricopa County, including 344 miles of new
or improved RFS highway and freeway corridors. Specifically, of the $8.5 billion in
excise tax revenues expected to be generated by the Proposition, $4.4 billion is
earmarked for RFS highway construction and another $354 million for minor RFS
maintenance projects. In combination with HURF and federal funds, the tax extension
enables new plans for the RFS including additional lanes on most existing corridors, the
creation of new freeways, new or improved traffic interchanges, new carpool (HOV)
lanes, Grand Avenue improvements, application of rubberized asphalt throughout the
system, and a comprehensive computerized freeway management system.
Proposition 400 also includes proposals for new non-RFS initiatives outside of ADOT
management, including arterial and streets development and improvement program, a
substantially expanded regional bus system and new light rail development.
RFS Program Management and Oversight
Building the Roads: RFS Program and Project Management
ADOT is statutorily required to manage the RFS construction. Within ADOT, the
Intermodal Transportation Division (ITD) is responsible for the majority of project
development statewide, including all engineering, construction, and administrative
functions required to advance a project from conception through design and construction,
and finally, into the operation and maintenance of the project. The entire development
process generally comprises four distinct phases—project scoping, design and pre-construction
activities, construction, and operation and maintenance. Collectively, these
phases are known as the project life cycle.
Responsibility for RFS program and project management specifically is shared between
several sub-divisions within ITD’s Valley Transportation Division, and the Right of Way
Group of the ADOT Development Division. The ADOT deputy state engineer, Phoenix
District Construction, Valley Project Management and the head of the Right of Way sub-division
coordinate their efforts in management and oversight of the RFS projects.
Generally, this coordination is accomplished through a single point project management
approach where an assigned project manager from the Valley Project Management Group
has responsibility for managing the budget and timeline and coordinating the
collaboration of specialty expertise, including external consultants, in the project design
and development process. The project manager hands off more authority for the project
at the point of construction to an assigned resident engineer from the Phoenix District
sjobergevashenk
10
Construction Group, though the project manager still remains involved. During the
construction phase, external contractors perform the work of building highways and
freeways, under construction contracts supervised by the resident engineer with some
collaborative input from the project manager. Once a freeway project opens to the
public, ADOT staff from the Phoenix Maintenance District monitor operation of the
project, identify areas where adjustments are warranted and communicate these to the
design and construction staff.
In 1995, ADOT also hired an external general consultant for all Regional Freeway
System projects who is involved in the daily issues of project design or construction and
provides post design services. The general consultant prepares general plans for regional
freeway projects, participates in progress meetings with ADOT, updates project
schedules and cost estimates, generates monthly reports, and reviews and revises costs
using recent bid prices. ADOT also frequently contracts with other external consultants
and contractors to provide professional services for more detailed designs, environmental
studies, or other project tasks.
Deciding How and Which Roads to Build: RFS Oversight
Project and program management oversight is necessary to monitor the progress of the
Accelerated Program and ensure that it is on time for completion by 2007 within the
available funding. Oversight starts internally, at a project management level. The
coordination of efforts between ADOT divisions as discussed above is crucial to the
success of project delivery under this structure. ADOT holds numerous weekly and
monthly project management meetings between the parties involved in the current project
phase to provide this basic level of oversight. For example, the deputy state engineer
holds weekly staff meetings to discuss project status, address issues at hand and discuss
possible solutions. In addition, designated project managers hold semi-monthly project
status meetings.
However, higher level oversight functions are also necessary, and are performed both
within ADOT and externally, in a multi-stage process, specifically involving the Project
Review Board (PRB), the Priority Planning Advisory Committee (PPAC), and two
outside entities, the State Transportation Board (STB) and Maricopa Association of
Governments (MAG).
Project Review Board (PRB) — ADOT provides additional internal oversight through
the PRB, which guides and monitors project progress from the beginning to the end to
ensure that the project managers are making appropriate decisions as to the overall
project delivery. The PRB consists of the deputy state engineer, district operations group
managers, and Statewide Project Management Section managers. The PRB serves as a
mentoring body for project managers and provides assistance to the deputy state engineer
in planning and staffing the highway division program.
sjobergevashenk
11
Priority Planning Advisory Committee (PPAC) — Providing a higher level of oversight,
and still mostly internal, PPAC consists of the ADOT finance director, state engineer,
three deputy state engineers, ADOT planning director, ADOT motor vehicle division
director, ADOT aeronautics director, and chair of the Citizens Transportation Oversight
Committee4 (who is a non-voting member). PPAC reviews and approves all proposed
changes to the Accelerated Program prior to any external review and approval.
State Transportation Board (STB) — STB has statutory authority over the state highway
system. It is comprised of a seven-member board appointed by the governor and
represents six geographical regions throughout the state, each member serving a six-year
term (two members represent Maricopa County). The board sets priorities over the
highway system, approves the Five-Year Highway Construction Program for statewide
projects, reviews and provides final approval for all PPAC approved project or program
budget and time changes, and is responsible for final approval of all RFS projects that
have been prioritized and funded by MAG. Additionally, the board has authority to issue
bonds that can be used to accelerate the completion of transportation projects.
Maricopa Association of Governments (MAG) — MAG is the regional planning agency
for Maricopa County and serves as its metropolitan planning organization. MAG’s
decision-making body—known as the Regional Council—includes elected
representatives from 25 incorporated cities and towns within Maricopa County and the
contiguous urbanized area, the Gila River Indian Community, the Salt River Pima
Maricopa Indian Community, Fort McDowell Yavapai Nation, and Maricopa County as
well as ADOT (represented by the Maricopa County members of STB) and the Chair of
the Citizens Transportation Oversight Committee (CTOC) in ex-officio capacities.
MAG’s Transportation Policy Committee—consisting of MAG members, community
business representatives, and representatives from transit and freight entities, CTOC and
ADOT—collaborates to develop the Regional Transportation Plan (RTP) for the
Regional Council’s approval. The RTP is a long-range 20 year planning document.
Under state statute, MAG prioritizes transportation projects based on qualitative criteria
such as congestion relief, travel demand, and cost effectiveness. The Committee also
prepares a Five-Year Transportation Improvement Plan (TIP) for the Regional Council’s
approval which identifies individual transportation projects and their sources of funding.
The TIP and RTP define ADOT’s responsibilities for RFS construction, to the extent they
are approved by STB.
4 State law provides for the establishment of a Citizens Transportation Oversight Committee (CTOC) in
Maricopa County and charges the seven-member committee with advisory responsibilities in the oversight
of the RFS including consulting with the Arizona Auditor General to define the scope of each performance
audit. CTOC does not have, however, review or approval authorities.
sjobergevashenk
12
Additionally, in 1991 MAG established a material change policy for any changes made
by ADOT to the RFS Program. According to this policy, MAG approval is required for
all changes to RFS project budgets or schedules that would cause:
o An increase in the cost of a project that is more than five percent of the adopted
project budget, but not less than $500,000, or any increase greater than $2.5
million; or
o A time delay of more than three months; or that prevents construction of a
freeway segment by one year beyond the dates on the Certified Regional
Freeway map; or, that delays the start of the project into another fiscal year
(compared to the most recent Life Cycle Report and the Long Range plan (RTP).
Such material changes are forwarded by ADOT to the MAG Transportation Policy
Committee and the MAG Management Committee. Final approval must be granted by
the MAG Regional Council.
Audit Scope and Methodology
Arizona Statutes, Title 41, Section 1279.03 requires the Arizona Auditor General to
conduct periodic performance audits in counties that have a transportation excise tax in
effect. This is the fourth audit related to the Maricopa County transportation excise tax
authorized under Proposition 300 in 1985. The Office of the Auditor General contracted
with Sjoberg Evashenk Consulting, Inc, to fulfill this requirement. The objectives of the
audit were to: (1) assess ADOT’s management performance of the Maricopa County
Regional Freeway System and recommend ways to improve ADOT’s efficiency and
effectiveness in fulfilling its overall responsibilities; (2) review and address statutorily
mandated issues; and (3) review and address other areas of interest, as identified by
stakeholders.
We reviewed federal and state laws and regulations related to transportation, right-of-way
acquisition, financing, and organizational responsibilities. Additionally, we researched
studies conducted by ADOT, others in Arizona, and entities at the federal level on topics
such as the industry’s best practices, alternative transportation, traffic volume and
modeling, and project management.
To understand how ADOT and other key players in Maricopa County’s transportation
network operated, we conducted individual interviews and attended meetings with a
cross-section of relevant parties and interested persons including ADOT, MAG, Regional
Public Transportation Authority/Valley Metro, Citizen’s Transportation Oversight
Committee, and ADOT’s general consultant. We met with the key managers and
decision-makers involved in the highway projects.
sjobergevashenk
13
To establish whether ADOT’s management over the Regional Freeway System was
efficient and effective, we analyzed a variety of documents including monthly project
status and update reports, Life Cycle Certification Reports, and project summary reports.
Additionally, we interviewed key ADOT officials and their staff to identify the tools and
techniques used to manage the progress of the Regional Freeway System and demonstrate
accountability to stakeholders. We attempted to compare baseline time milestones and
cost estimates against completed dates and actual cost data both for the Accelerated
Program overall, and for specific projects. Through interviews and review of monthly
performance reports, we assessed the appropriateness and usefulness of ADOT’s
performance measures used to manage the freeway system. Furthermore, we sub-contracted
with Quincy Engineering, a Transportation Engineering expert, to review and
assess ADOT’s practices in areas such as project management, cost estimating, and right-of-
way acquisition.
With the assistance of our Transportation Engineering Consultant, we also attempted to
ascertain if ADOT would meet the Accelerated Plan’s 2007 completion timeline. To
predict ADOT’s ability to meet this schedule, we evaluated ADOT’s past performance in
meeting internal timelines and critical milestones. Specifically, we selected a sample of
14 projects to evaluate development and construction budgeting and timeline
performance, and a sample of 20 parcels for which ADOT acquired right-of-way to
evaluate timeliness and cost controls (in addition to general compliance with state and
federal statutes and regulations). With our Transportation Engineering Consultant, we
also reviewed two projects in-depth, from the planning phases through the completion of
construction, in order to observe the project development process as well as the adequacy
of costs controls and documentation.
To assess ADOT’s revenue and expenditure practices and its forecast models, we
reviewed audited financial statements, Life Cycle Certification Reports, construction cost
estimate reports, revenue forecasts, cash flow calculations, assumptions behind non-traditional
funding mechanisms, and various management documents used by ADOT.
Additionally, we performed analytical reviews on revenue and cost estimates to evaluate
past performance and project future trends. To assess the reasonableness of cost
estimates, we worked cooperatively with our Transportation Engineering Consultant to
compare ADOT’s cost criteria against other state transportation departments. We also
captured historical data to assess actual expenditures against estimated expenditures at a
summary level. Furthermore, we attempted to evaluate ADOT’s ability to meet cost
estimates—from an individual project perspective—by comparing actual expenditures
against estimated expenditures using our sample of 14 projects.
Finally, we were also asked to review 13 specific areas, including traffic projection issues
and alternative transportation issues. To examine these areas, we performed a variety of
audit techniques and analyzed a variety of documents. Because many of these issues were
sjobergevashenk
14
specific and not necessarily related to our primary reportable issues, we address each
question in Appendix A.
We conducted this audit in accordance with generally accepted government auditing
standards. We limited our review and analyses to those areas described in Audit Scope
and Methodology section of the report. The audit issues resulting from these analyses
were presented and discussed with representatives of ADOT, MAG, and STB prior to
completion of the audit fieldwork.
sjobergevashenk
15
CHAPTER 2
Historical performance indicates that ADOT is likely
to complete the remaining Accelerated Program
projects by 2007.
As of January 2005, the Accelerated Program was approximately 78 percent complete.
ADOT’s performance at managing the funding, design, engineering, right-of-way
acquisition and construction of the network, or the Maricopa Regional Freeway System
(RFS) since 2000 through January 2005, indicates that the department will most likely
complete the remaining 22 percent by the close of calendar year 2007. Specifically, an
analysis of the department’s projected to actual scheduling performance since 2000
shows that ADOT has typically met its goals and/or adequately allowed for slippages
and, further, that the remaining funding projected for the program should be sufficient.
Additionally, we found that ADOT’s project management practices have improved
significantly in recent years and are currently sound and functioning well.
However, we cannot conclude more definitively about whether ADOT will meet all of
the goals for the Accelerated Program by 2007 for several reasons, including the
possibility of unpredictable delays or cost overruns which may be out of ADOT’s control
and the current scheduling which includes some projects that will need to be tightly-managed
to complete on time. Additionally, over the last five years, the scope of the
Accelerated Program has been subject to redefinition every six months.
ADOT’s Performance Since 2000 Supports the Likelihood of
Completing the RFS on Schedule
As of January 2000, the newly adopted Accelerated Program projected completion of
144.1 miles of regional freeway in Maricopa County by 2007, which included 58.2 miles
constructed in the fifteen years since the RFS was originally proposed and adopted in
1985 (at an approximate rate of about four miles constructed per year). As of January
2005, the total projected miles for the RFS had been reduced to 137.9 miles, but 107.6 of
those miles had been constructed. In other words, ADOT had completed 49.4 miles in
the five years between January 2000 and January 2005, at an approximate rate of 9.88
miles a year. With only 30.3 miles remaining to complete before the end of calendar year
2007 (another three years), ADOT appears to be on track. Figure 3, “Accelerated
Program, January 2005 Life Cycle Certification” displays the current map of planned and
completed corridors. (Sections and projects due to begin construction or yet to complete
sjobergevashenk
16
construction are indicated by leading lines or brackets and a ratio such that the numerator
indicates the estimated year of completion and the denominator indicates the anticipated
costs in millions.)
Figure 3. Accelerated Program, January 2005 Life Cycle Certification
Source: Arizona Department of Transportation, January 2005
The status of the miles completed and remaining miles to complete by major RFS
corridor, and by percentage, are displayed in Table 1, “Status of RFS Program Miles by
Corridor, as of January 2005” and Figure 4, “Status of Program Miles by Stage, as of
January 2005”.
sjobergevashenk
17
Table 1. Status of RFS Program Miles by Corridor as of January 2005
Corridor Completed
Under
construction Planned Total Miles
Agua Fria 22 22
Grand Avenue 2.7 1.8 0 4.5
Hohokam 3.1 3.1
Pima 28.2 28.2
State Road 51/Superstition 10.2 10.2
Red Mountain 21.5 2 7.4 30.9
Santan 6.6 18.2 0 24.8
Price 9.9 9.9
Sky Harbor* 2.4 0 0.9 3.3
South Mountain** 1 1
Totals 107.6 22 8.3 137.9
* The remaining 0.9 mile planned for Sky Harbor may be completely withdrawn, depending on a decision
still pending by the City of Phoenix and MAG Regional Council.
**As of January 2005, further development of the South Mountain corridor, 21.1 miles for which are shown
as under study in the current Accelerated Program, will not be funded until implementation of Proposition
400.
Planned
6%
Currently under
construction
16%
Completed
78%
Figure 4. Status of Accelerated Program Miles as of January 2005
Source: Arizona Department of Transportation, January 2005
sjobergevashenk
18
ADOT Generally Appears to Meet its Completion Goals and/or to Adequately
Allow for Slippage
To complete the Accelerated Program, approximately 64 projects are scheduled for
construction between 2005 and 2007, including some major construction scheduled to be
completed by the end of the third quarter of 2007. Most of the 64 projects are already
under construction and of those that are not, most are already in advanced design phases
with any necessary environmental studies already completed or nearing completion. For
a number of these projects, 78 parcels still require the acquisition of rights-of-way.
In a review of the completion estimates compared to actual completion dates for five
construction projects, we found that four were completed on time. (One project was
delayed due to a local agency’s permit issue outside of ADOT’s control.) Additionally,
we discovered in a review of the timeliness of right-of-way acquisition for a sample of 20
projects that ADOT had not consistently met its official right-of-way acquisition goal of
obtaining clearance for use of the property at least two months before the construction
contract is sent to bid. However, in those cases that acquisition had taken longer, it
appeared ADOT had been able to acquire clearance in time to enable construction
completion goals to be met.
In effect, comparisons of the estimated project timeline assumptions for completed
projects in the Accelerated Program against the current status of the remaining projects,
suggest that it is reasonable to expect that the remaining projects will be completed by
2007.
Accelerated Program Costs are Reasonably on Budget
The total RFS project obligations as of January 31, 2005 (including those preceding the
adoption of the Accelerated Program) have amounted to approximately $5.6 billion5. Of
these expenditures:
o $5.2 billion have been spent or obligated for projects that have been completed or
are in progress.
o $389 million has been dedicated to projects yet to commence.
As the focus of this audit was the Accelerated Program, we did not attempt to gauge the
overall budget performance for the RFS since 1985. However, in a comparison of the
total programmed expenditures for the Accelerated Program in ADOT’s Life Cycle
Certification Report of 20006 to the actual spending and remaining amount projected as
of July 2004, we found overall Accelerated Program expenditures to be approximately
5 Source: January 2005 Life Cycle Certification Report. ADOT’s Chief Financial Officer noted that it is
difficult to impossible to determine or confirm the exact costs of the RFS since 1985 because ADOT’s
automated systems are unable to provide reliable data going back to late 1980’s and early 1990’s.
6 The projected expenditures in the January 2000 Life Cycle Certification Report would have included
projections for projects that had been initiated since 1985 that had yet to be completed.
sjobergevashenk
19
seven percent over the original budget. Specifically, in 2000 the Accelerated Program’s
expenditures were budgeted through 2007 at $2.035 billion. In July 2004, the revised
budget set the program’s (actual and projected) expenditures at $2.177 billion—$142
million more, a difference of approximately seven percent. Additionally, an ADOT staff
analysis of budgeted to actual expenditures limited specifically to projects planned and
completed between 2000 and 2004 showed a difference of not even quite one percent.
Due to the highly variable nature of large-scale construction projects, overall, a deviation
below 10 percent between the projections of 2000 compared to the 2004 projections
appears reasonable by industry standards.
Funding Appears Sufficient to Complete Accelerated Program
Available funding for the Accelerated Program is projected on the rate of ADOT’s RARF
and HURF-secured bonds amortization, forecasts of the transportation excise tax and
highway user revenue proceeds, a predictable amount of Federal grants, interest income,
local and state federal funds for specifically programmed projects, and some
miscellaneous income (e.g. from the sale of excess property, rent, etc.). ADOT’s Chief
Financial Officer certifies these projections every six months in ADOT’s Life Cycle
Certification Report.
For internal tracking purposes, ADOT maintains a current cash flow analysis to monitor
and project its available funding through the estimated completion of the Accelerated
Program by the end of 2007. While we were concerned to note that projected
expenditures in this analysis are based on 30 percent design estimates—which as noted
later in the report, we found to be a somewhat unreliable indicator of actual
expenditures—this issue is mitigated by two factors:
o First, a cash flow forecast issued of available funding prepared for the January
2005 Life Cycle Certification Report shows a positive cash balance remaining at
the end of 2007 of over $108 million. Considering that the remaining projected
expenditures from January 2005 through the end of 2007 are approximately $1.4
billion, this leaves a cushion of nearly 7.7 percent. Please see Figure 5, “Total
Available Funding through 2007 (in thousands).”
sjobergevashenk
20
Figure 5. Total Available Funding through 2007 (in thousands)
Source: Arizona Department of Transportation, January 2005
o Second, ADOT, its oversight agencies, MAG, and the STB, require that any
proposed scope and budget changes for Accelerated Program projects be
predicated upon the cash flow analysis. Specifically, they would not allow a
change that exceeded available funding. Further, in the last four years, ADOT has
not had to reject a project change request for budgetary reasons.
Thus, the remaining Accelerated Program appears to have sufficient funding to complete
the remaining projects by 2007.
Project Management Procedures and Processes, While They Could
be Better Documented, are Sound and Functioning Well
We found that the project management model currently being used by ADOT is
appropriate and working well, which supports the likelihood of timely completion of the
Accelerated Program. The level of coordination between project phases and specific
methods of project management align with best practices defined by the Federal High-
Ways Administration (FHWA). Moreover, the process for controlling change orders
appeared sound and rigorous. However, while this issue does not affect the likelihood of
completion, we also noted opportunities for improvement in ADOT’s project
documentation practices and policies.
ADOT Has Improved its Project Management for the Accelerated Program
To better understand the project management process, we asked ADOT to walk us
through the project management documentation and key decision points for two projects,
Remaining available
funding; $108,666;
7.7%
Total projected
expenditures;
$1,419,062; 92.3%
sjobergevashenk
21
one initiated in the 1980’s and one initiated prior to adoption of the Accelerated Program,
but which was nonetheless managed primarily as an Accelerated Program project.
As a result, it became readily apparent to our transportation engineering consultant that
ADOT transitioned from weak and ill-defined formal project management procedures in
the mid 1980’s to a well defined project management system for delivering the
Accelerated Program. For example, during the era of 1986 to 1995, ADOT hired
consultants to deliver entire corridors. However, inadequate controls were in place for
ADOT’s management of such corridors, and both timelines and budgets slipped
significantly. In 1995 ADOT cancelled the corridor contracts and changed their
management model to have a single “general consultant” to better define each project
prior to awarding a design contract and increase the roles and responsibilities of staff in
managing the project’s development. In addition, ADOT developed a Project
Management Process Manual that comprehensively defines the project development
process, the roles of staff in delivering and monitoring projects within corridors, and the
processes for review and approval of proposed changes.
Overall, our transportation engineering consultant found that ADOT has made an
excellent transition from limited project management when the RFS was first initiated 20
years ago to now having significant policies and procedures in place that support a sound
management system.
ADOT Has Nearly “Seamless” Transitioning Between Project Phases
Currently, ADOT applies a team work approach to project management, based upon a
Project Work Plan (PWP) that defines project objectives, the scope of the project,
responsibilities of each functional (technical) unit as well as resources needed to deliver
on the schedule identified. While a design project manager is responsible for
implementing the PWP through the development and design stages and a resident
engineer assumes responsibility for the delivery of the construction project; however, to a
large degree the project manager and resident engineer—as well as other pertinent parties
—work together throughout most of the life of the project.
Specifically, during the development phase the project manager works closely with
ADOT’s general consultant to get a project to a 30 percent design stage prior to awarding
the design contract. The general consultant continues to stay involved through later
design phases, helping to analyze design costs and variations that could result in
repackaging construction segments that might expedite delivery or save money. The
project manager conducts regular meetings of all the key staff or consultants necessary to
develop the evolving design, including those involved in the acquisition of right-of-way,
utility relocation, or environmental studies for the project, local governmental
stakeholders, and later, the consultants responsible for the 60, 95 and 100 percent design
plans.
sjobergevashenk
22
Once a project has reached the 60 percent design stage, the resident engineer becomes an
active participant in the development of the project and begins to participate in all
relevant meetings. Until the construction phase, the project manager retains
responsibility to carry out the PWP including scheduling team meetings, staying within
budget and keeping ADOT and MAG management apprised of the project status.
However, during the construction phase, the resident engineers assumes authority and
responsibility to carry out the construction contract, and the project manager’s role
becomes one more of reporting rather than authoritative7.
The formal project “handoff” between design and construction is done as part of the
“Partnering Meeting” at the initiation of construction. Our transportation engineering
consultant found it notable that the project manager continues to attend safety meetings
with the contractor and otherwise remains involved during construction in order both to
fulfill the project manager’s reporting responsibilities and to provide the continuum of
knowledge of decisions and commitments made during the design phase. In addition,
through this process, the project manager is informed and signs off on contract change
orders even though it is the resident manager, not the project manager, who has the
authority to approve these change orders8.
Our transportation engineering consultant found this degree of coordination impressive
and likely to enable very productive, nearly “seamless” overlap between the phases.
ADOT’s Project Management Style Appears to Meet Industry “Best Practices”
with Regard to “Cradle-to-Grave” Single-point Project Coordination and Multi-disciplinary
Integration
Over the past decade, national trends in the transportation industry have moved more
toward integrated approaches to transportation solutions9, both as they relate to the
inclusion of various stakeholders in project development, as well as with regard to the
phases of project development. Specifically, we found that ADOT’s project management
style conforms to a significant degree to two of the industry’s best practices: “cradle-to-grave”
single-point project management, and the integration of various disciplines and
stakeholders in project development and management.
7 According to our transportation engineering consultant, it would not be possible or desirable for the
project manger, who manages several projects at various stages, to take over the full-time responsibility of
managing any one of those projects through the construction phase; to this extent a single-point project
manager from “cradle to grave” is not truly feasible.
8 As noted later in the report, the resident engineer’s and project manger’s ability to authorize contract
change orders is limited to a certain dollar threshold amount above which progressively more layers of
review and approval are required.
9 As noted in the FHWA’s “Integration and Streamlining Transportation Development and Decision-
Making – State of the Practice Synthesis Report” July 2003.
sjobergevashenk
23
“Cradle-to-grave” Single-Point Project Management
Our transportation engineering consultant was careful to note that considering the size,
complexity, and duration involved in delivering transportation projects, it is probably not
desirable or possible to have a single person assigned to each project throughout all its
phases—from planning through design, construction, operation and maintenance.10
Consequently, he believes that ADOT’s degree of coordination first by the project
manager, and then by the resident engineer, results in a “single point project
management” style, specifically in which projects are overseen from “cradle-to-grave” by
an individual or team of managers. A July 2003 FHWA report cites this type of “cradle
to grave management approach”—one in which “a single person, or team of persons, is
responsible for managing the project from inception to completion”—as having the
following benefits:
o Improved understanding of total costs and impacts of proposed projects
o Providing a central contact for members of the community as well as internal
agency staff on the project
o Enabling timely tracking of concurrent activities and monitoring of the project
schedule
As mentioned earlier, we recognized some of these benefits in play in ADOT’s current
project management structure.
Integration of Disciplines and Stakeholders in Project Development and Management
The FHWA report also states that “in an integrated approach, all disciplines are more
involved in the initial planning and scoping phases when alternatives are developed and
the preferred solution is identified. The increased participation earlier and throughout the
process helps to ensure consensus and minimize potential conflicts.” In keeping with
FHWA best practices, ADOT makes an effort to keep members on the project informed
of the progress throughout the length of the project.
Example 1: Integration of Right-of-Way Division
For instance, since the adoption of the Accelerated Program, it seems as though ADOT
has involved Right-of-Way (ROW) from the inception of the project planning process.
Many states surveyed in 2003 by the FHWA responded that “ROW was not solicited
early enough to be effective under old processes” and since “acquisition is often
identified as the critical path for capital projects, therefore it has been given a heightened
level of attention within the department.” Earlier integration allows ROW “to address
issues and concerns that would otherwise result in increased design and ROW costs as
well as project delays.” Thus, ADOT’s efforts seem to be in-line with the best efforts
identified by the FHWA in other states.
10 ADOT also includes maintenance staff, who begin participating in preconstruction meetings, in its
coordination of projects.
sjobergevashenk
24
Example 2: Integration of local governmental stakeholders
Recently, ADOT’s Communications and Community Partnership Office (CCP) has
become a more significant member of the RFS project management team. Specifically,
CCP staff participate and arrange for the local governmental representatives (or other
affected constituents) participation in project development and construction meetings.
For the last several years, ADOT has included MAG representatives in bi-weekly and
monthly briefings on the RFS. Overall, this project-level involvement helps to ensure
that local stakeholders’ concerns are understood and considered throughout project
implementation. According to the FHWA, “early and continuous communication with
the public is integral to ensuring that a project satisfies the needs of the users.”
ADOT Has a Sound Process for Controlling Change Orders
ADOT’s Project Development Process Manual requires the preparation of project cost
estimates at each stage of the process. We found ADOT’s methods of estimating similar
to ones used in other states with the detail of each estimate improving as the project is
refined. Further, we found that appropriate, industry standard contingencies are added to
in the estimates at each stage to account for the level of detail at that stage.
If a scope, schedule, or cost change is needed before the next stage, ADOT prepares a
change request that includes justification. Depending on the significance of the proposed
change, the review and approval of the request is conducted by various committees,
either internal to ADOT and/or including MAG and the STB. Material changes, for
example, are defined as changes to RFS project budgets or schedules that cause an
increase in the cost of a project that is more than five percent of the adopted project
budget, but not less than $500,000 or any increase greater than $2.5 million. Material
schedule changes are delayed when construction completion is delayed by more than
three months; the construction phase of a segment is delayed by one year beyond the date
on the Certified Regional Freeway map; or the start of the project will occur in a fiscal
year different than shown in the most recent Life Cycle Report and the Long Range Plan.
Material changes require review and approval by several internal ADOT committees
prior to submittal for approval by two outside entities, the STB and MAG.
Smaller changes also have review and approval processes depending on the threshold of
cost increase or time delay and the phase of development in which they are sought. For
example, during the design phase budget changes less than $200,000 may be approved by
the project manager. Changes of over $200,000 are approved by the Design Group
managers and also require the approval of the Project Review Board, an internal
committee of ADOT’s RFS design and construction groups. Changes that exceed the
project budget by $200,000 or 15 percent (whichever is lesser) and projects that change
fiscal years require Project Review Board approval, then the approval of the Priority
Planning Advisory Committee, which is comprised of ADOT executives, including fiscal
sjobergevashenk
25
staff, as well as a non-voting advisory member from the Citizens Transportation
Oversight Committee. Most projects presented to the PPAC for adjustment will also be
forwarded to the State Transportation Board so that it can take formal action to reprogram
the project’s funds.
Changes during the construction phase resulting in new costs of less than $10,000 require
a letter of agreement between the contractor and the resident engineer; while changes of
over $10,000 but less than $50,000 require a formal change order request, they are
approved by the resident engineer who, in addition seeks project manager’s consent on
design changes that are greater than $25,000. The district engineer approves changes
greater than $50,000 but less than $250,000 while a formal change order must be
approved by the project review board following the design phase change request
requirements of over $200,000 or 15 percent of total project budget.11 In other words,
ADOT’s processes generally and appropriately involve progressively more layers of
review as changes become more significant and costly.
Generally, our transportation engineering consultant found ADOT’s process for
controlling change orders to be sound and rigorous enough to support the likelihood that
the Accelerated Program will be completed on time and within available funding.
ADOT Could Improve Documentation Policies and Practices
Despite ADOT’s sound project management and change order controls, we found that
ADOT did not have a uniform system or policies to document project-related detail from
the inception to delivery. For instance, ADOT relied on its general consultant to provide
various reports, rather than maintain in-house data, in order to reconstruct 30 percent
design estimates for the projects we selected for review, and also for the minutes on
design coordination meetings allowing the re-creation of the project development trail.
When we requested the 30 percent design estimates for fourteen projects, ADOT (and its
general consultant) initially could provide estimates for only four of the projects. This
was particularly notable since ADOT asserts that it projects expenditures for the purposes
of evaluating the Accelerated Program’s available funding based on these estimates.
After several weeks, we did receive estimates for the other 10 projects as well; ADOT
staff just had difficulty locating them.
Further, we noted that one project we reviewed had a high variance between the budget
and actual amounts spent ($4,865,000 budgeted compared to $11,183,636 expended).
When we asked about the reasons for this discrepancy, the key information for the budget
changes and justification for these changes was not readily available. While we were
11 For Contract Change Orders (CCOs), ADOT has controls on who provides the authorizing signature for
the change to the contract. For CCOs less than $50,000, the resident engineer may approve; between
$50,000 and $250,000 the construction district engineer must provide the authorizing signature. The deputy
state engineer must authorize CCOs with costs ranging between $250,000 and $500,000; and the State
Engineer authorizes CCOs greater than $500,000.
sjobergevashenk
26
later provided a re-printed unsigned letter which ADOT staff asserted had been sent as
documentation, we were surprised to find that the documentation of the Deputy State
Engineer’s authorization of a budget change of over $500,000 was not more formally
maintained.
Additionally, issues related to documentation and records accessibility were also
addressed in a prior audit12. Specifically, the following recommendation was made:
o Identify additional information to be documented during project development and
construction and who is or should be maintaining the documentation. At a
minimum, documentation should include deliverables and documentation of
significant decisions and actions taken during the course of individual projects.
While these memorialization and documentation retention issues do not impact the
likelihood of the Accelerated Program’s timely completion within remaining funding, we
encourage ADOT to recognize them as opportunities to improve its transparency and
accountability, as well as to facilitate information-sharing in-house on a forward-going
basis. Generally, our transportation engineering consultant agreed that it is good practice
in providing the governmental oversight and management of large-scale construction
programs to ensure that project files be centrally located and include hard copy evidence
that documents all key project milestones and decisions, including adherence to the
protocols for review and approval of change requests (at any level).
A More Absolute Conclusion on Likely Accelerated Program
Completion is Impossible
Despite all indications that the Accelerated Program will be completed on time, we are
unable to conclude definitively that it will be. To begin with, large-scale construction is
frequently subject to unpredictable delays and cost overruns for a variety of reasons.
Workers can strike. Steel prices can suddenly sky-rocket. Concrete can be subject to
sudden shortages. Affected local jurisdictions can suddenly decide to withdraw their
funding portions and approval of design, or catastrophic weather can erase progress or
just delay it beyond expectations. This myriad of potential interruptions to construction
work can disrupt the best-laid plans and exhaust the most conservative contingency
funds. ADOT is not able to completely control for these possibilities—though, as noted,
for the most part we found its systems to be designed to accommodate an appropriate
level of unpredictability.
12 “Performance Audit of the Arizona Department of Transportation: a Review of the Maricopa County
Regional Freeway System,” Sjoberg Evashenk Consulting, July 2000.
sjobergevashenk
27
These uncertainties, coupled with some additional issues regarding the likelihood of
completion described below, affect our ability to conclude unequivocally on the
Accelerated Program’s timely conclusion. Specifically we identified a few issues where
completion may face particularly tighter timelines or budget consideration while ADOT
faces critical staff vacancies. Also, the Accelerated Program has a history of being
subject to redefinition, which could make the definition of “completion” a moving target.
Successful Completion Faces a Few Particularly Tight Timeline and/or Budget
Considerations
Again, while mitigated by a recent history of generally solid performance, ADOT faces
some possible tight spots in its completion of the Accelerated Program. For example, as
of January 2005, ADOT was still working to acquire right-of-way on 78 parcels. As
noted earlier, in the past ADOT has consistently been able to gain clearance to begin
work on needed parcels prior to the scheduled start date of construction, thus preventing
right-of-way acquisition from holding up the construction phase. However, based on our
review of 20 right-of-way acquisitions, on average, obtaining clearance took 21 months,
where 10 months represented the shortest time period and 54 months the longest.
Considering that most construction is due to complete by the end of 2006, if remaining
parcels take as long as the average of our sample from January 2005 to obtain
clearance—which means construction will not be able to commence before mid to late
2006—ADOT will face some particularly tight scheduling in order to stay on track for
completion.
Additionally, as discussed earlier, while ADOT has been able to control program budgets
through a series of semi-annual budget adjustments and revisions, our analysis shows the
Accelerated Program was approximately seven percent over budget overall as of July
2004 when compared to the program budget set in 2000. A more careful analysis of this
number actually reveals widely disparate budget performance between corridors, as much
as 46 percent under budget to 35 percent over budget. The corridors that had the highest
budget overruns are also those still under construction (Red Mountain—nearly 35 percent
over budget, and Santan—approximately 18 percent over budget); much of these budget
increases stemmed from unanticipated escalation in right-of-way acquisition costs. The
bulk of the remaining right-of-way acquisition is for the Red Mountain and Sky Harbor
corridors. (Red Mountain and Sky Harbor are the corridors with major construction
scheduled to complete by the end of 2007.) Sky Harbor is currently more than eight
percent over budget, although it is also on hold at the request of the City of Phoenix.
The current cash flow analysis reveals an ability to accommodate the projected seven
percent increase in the January 2005 budget and still remain within the available funding.
The January 2005 budget for Red Mountain reflects only a 1.2 percent increase in
projected right-of-way costs; no change is reflected in Sky Harbor projected right-of-way
costs. While this does not necessarily indicate that budget overruns for either corridor
sjobergevashenk
28
would prevent successful completion of the Accelerated Program within the available
funding, again, it may indicate the possibility that ADOT will face a challenge of
particularly tight timelines and challenges for any new budget increases within the
remaining funding available.
ADOT Faces Significant Staffing Vacancy Issues
Our transportation engineering consultant stated that ADOT’s current documentation
policies and practices result in a sort of dependence on staff remaining consistent for the
life of project development and construction. ADOT’s current staffing issues, however,
suggests that reliance on staff retention for project continuity may not be a safe approach.
At the time of our review, the Intermodal Transportation Division (ITD), the ADOT
Division with responsibility for the management of highway construction generally and
the RFS specifically, had 249 vacancies in 2,216 authorized full-time positions—a
vacancy rate of approximately 11.2 percent. For the ITD groups most responsible for
delivery of the RFS, the average vacancy rate was approximately 16.5 percent. Please
refer to Table 2, “Significant Vacancies in Critical Department Groups” for a breakdown
of the vacancy rates among these ITD groups or sections.
Table 2. Significant Vacancies in Critical Department Groups
ITD Group or Section
Number of
positions
Number
vacant
Vacancy
rate
Valley Project Management 11 3 27.3%
Phoenix Construction 214 51 23.8%
Phoenix Maintenance 198 22 11%
Right of Way 92 9 9.8%
Totals/average: 515 85 16.5%
Moreover, the turnover rates for critical journey-level engineering classes—from which
project managers and resident engineers are assigned—were particularly high in these
groups. Of 134 vacancies throughout ITD in these classes, 68.7 percent were in sections
or groups responsible for delivery of the RFS.
This not only presents a possible challenge to ADOT’s ability to ensure that when it is
most needed, adequate staffing will be available to provide tighter project management,
but additionally, without comprehensive and detailed project management
documentation, ADOT risks losing the institutional knowledge gained in the
development and construction of the RFS to date as more journeyman level staff move to
private industry and as executive and senior management continue to retire. In order to
continue to ensure successful RFS project development and management ADOT will
need to build from the experiences of the Accelerated Program projects, which may be
difficult, if not impossible, if key staff or management retire before ADOT memorializes
sjobergevashenk
29
and ensures adequate documentation of what is currently held exclusively as institutional
knowledge by these critical employees.
Accelerated Program has Been Subject to Changing Definitions
Every six months, the Accelerated Program budget, funding, and timeline is re-examined
and certified in ADOT’s Life Cycle Certification Report, which memorializes the most
current plan for the program, based on the review and approval of any change requests in
the six months since the prior report, and explains the changes from the last report to the
most current. In effect, the Accelerated Program’s scope, budget, and specific timelines
for completion are publicly redefined every six months. While each new iteration is
consistent with the goal of completion by 2007 within the available funding, to some
degree the Accelerated Program that is due for “completion” becomes a moving target, as
defined by ADOT, MAG, and the STB.
As an example of how the definition of completion has changed, when we examined the
January 2000 Life Cycle Certification Report, we noticed that the Accelerated Program
was projected to include 144.1 miles. As of January 2005, it was projected to include
137.9 miles—a reduction of 6.2 miles. ADOT has provided explanations for the
reductions in the Life Cycle Certification Reports as they occurred, the most significant
of which was the reclassification of 8.8 miles of the South Mountain corridor from
“planned” to “unfunded”—for good reasons, including an on-going environmental impact
study and since further development of this corridor will not be funded until
implementation of Proposition 400. However, when we say that the “Accelerated
Program” is likely to be completed by the end of 2007, we are addressing the 137.9 miles
version of the Program, and not the original program which included the 8.8 miles of the
South Mountain corridor.
Technically, this supports the likelihood of “completion” of the Accelerated Program by
2007 and within available funding; however, the shifting definition of “completion”
presents a dilemma in concluding which “Accelerated Program” will be completed.
ADOT, MAG and STB policy does not assure that what will be completed by the end of
2007 will be the program as currently defined.
sjobergevashenk
30
CHAPTER 3
ADOT’s, MAG’s, and STB’s Efforts at Analyzing the
RFS Program Should be Broadened
Oversight of the RFS is provided collaboratively by the State Transportation Board
(STB), Maricopa Association of Governments (MAG), and ADOT. The Citizens
Transportation Oversight Committee is also charged with review and advisory
responsibilities related to the RFS, but it does not have any authority to approve or
disapprove ADOT plans or proposals. Under Arizona statutes, it is ADOT, MAG and
STB which share the explicit responsibility to deliver the Accelerated Program on time
and within the available funding. Chapter 2 recognizes their success in serving this
responsibility.
However, these agencies also share an implicit responsibility conferred by the public’s
trust to assure the RFS’s cost-efficiency and effectiveness, as also recognized in ADOT’s
strategic planning goals. This chapter addresses opportunities for broadening oversight
practices and systems that would assist in assuring the program’s cost-efficiency and
effectiveness. These include providing a historical review assessing proposed program or
project changes, and consolidating ADOT’s Accelerated Program and project data for
easier tracking and analysis of historical performance.
Since 1985, ADOT has made several improvements to the management of the RFS,
specifically including improved project management processes, controls and
documentation. While nothing in this chapter is meant to convey that the management of
the RFS has not been cost-efficient or effective—or, specifically, that there is necessarily
money or time that could have been saved—it is nonetheless the case that better systems
for holding the program to account for incremental and cumulative budget and timeline
deviations should create new opportunities to learn how to improve RFS management in
the future. The issues raised in this chapter are intended to support ADOT’s value of
“excellence and continuous improvement,” which is also a best practice identified by the
FHWA, and an important goal of all governmental agencies.
Oversight Processes Should Include Historical Review of Projects’
Progress When Evaluating Budgetary or Timeline Revisions
Currently, ADOT, MAG, and the STB serve their responsibility to ensure that the
Accelerated Program is completed on schedule and within available funding through a
sjobergevashenk
31
process of regular review of the status of the program, and any proposed change orders to
specific projects which may affect program delivery overall. This process, however, does
not include historical review of budgetary and timeline changes, or other ways of
assessing ADOT’s long-term cost-efficiency and effectiveness. This evaluative
information may prove useful in establishing best practices or “lessons learned” on
various processes or activities in delivering the RFS, yet would entail little administrative
effort to capture.
Evaluative Information Doesn’t Include Historical Context
MAG and the STB primarily evaluate changes to the Accelerated Program through the
process of reviewing and approving material change requests. In addition, the STB
annually approve one of ADOT’s semi-annual Life Cycle Certification Reports, which is
prepared for the general public and memorializes the most current estimates and budgets
for the program.
The Life Cycle Certification Report provides only a snapshot-in-time look at the
Accelerated Program. While it may address recent changes to the program, its purpose is
not to contextualize them with comparisons to prior, much less original, versions of RFS
budgets, schedules, or scopes. At the time MAG and the STB are asked to approve such
changes, they receive slightly more background and context justifying the need for the
change. However, they also only receive information comparing the most current budget,
scope and schedule to the newly proposed one. They do not receive historical
comparisons of the original budget, scope, and estimate for completion and all of the
changes prior to the most currently proposed. Also missing from the information MAG
and STB receive as support for a requested change or the newly revised Life Cycle
Certification, are analyses of the project’s relative cost-efficiency (such as comparison to
the average cost per mile for ADOT projects of similar types).
Historical Data has Been Limited Until Recently
To a certain degree, ADOT could not have provided this type of historical context or
analysis in support of proposed changes to much of the program until only recently. In
1985, when the original plans and budgets for the RFS were established, ADOT did not
have adequately sophisticated information technology to set up a database or coordinated
databases that could track program and project development, specifically including
deviations from early design estimates, scopes and completion schedules. In 2000, when
the Accelerated Program was adopted, most of the projects and the entire general plan
had been established years earlier. Implementation of the Accelerated Program has
involved initial scoping and development of some specific projects within the context of
the larger plan, but for the most part, early documentation of the original plans for the
majority of the projects completed during the Accelerated Program is simply not
available in formats that would enable easy reconstruction of their complete historical
context.
sjobergevashenk
32
Presently ADOT does have adequate information to provide this type of context for
Accelerated Program projects initiated within the last few years. However, it is simply
that the process of program change evaluation has not been adjusted to provide it.
Expanded Use of Historic Performance Could Provide Useful, Evaluative
Information
MAG reported occasional efforts to evaluate the trends in types of cost increases and
identify opportunities for improving RFS design considerations. Some example results
that were cited included adding the consideration of drainage and utility relocation needs,
as well as the need for wider ramp structures to allow for future ramp expansion.
However, for the most part we did not see dedicated efforts to this type of analysis as part
of the regular oversight processes.
For the purposes of our review, we tried to piece together some historical context for the
Accelerated Program from past Life Cycle Certification Reports. While these data could
provide best practices and lessons learned it may also assist in analyzing budgets or
project costs. For instance, it could help in determining:
• The potential that actual project costs are being understated through the use of a
“system-wide” expenses category and thus may not reflect true degree of
deviation from budget.
• Whether right-of-way budgets are currently not designed to allow a retrospective
analysis of cost increases.
• Whether initial project budgets may not reflect the actual project funding needed.
Use of “System-wide Expenses” Category Understate Actual Project Costs
Every six months, as part of the revision of the Life Cycle Report, ADOT reviews and
adjusts the amounts budgeted for the “obligations” (projected and actual expenditures), in
the “system-wide” category. The total in this category as of January 2005 was
approximately $111.8 million. Expenditures in this category include Freeway
Management System costs (an automated system necessary to control freeway traffic),
system-wide change orders, ADOT staff charges, risk management indemnification costs,
right of way advanced acquisition costs, etc.—all of which ADOT management may find
useful to track separately of design and construction costs. However, a closer look at the
actual expenditures reported in this category, revealed that many were traceable to
specific projects, suggesting that they could have been reported as corridor or project-specific
costs. In fact, every “system-wide” expense we tested traced to a specific
project.
Good business practices and generally accepted accounting practices typically require
costs that can be identified to a project or specific activity be directly attributed to those
sjobergevashenk
33
cost drivers to properly reflect the cost of particular activity or a cost center. While
ADOT may find the system-wide category of obligations useful to capture for its own
internal management purposes, by not identifying and reporting all project-related costs
as charges to specific projects for individual corridors in its Life Cycle Certification
Reports, it may be obscuring true project costs in its representation of the Accelerated
Program’s performance to the public and its oversight agencies. Additionally, unless
ADOT, MAG, and the STB receive reports accurately reflecting the true accounting for
project costs, decision-makers may be foregoing the opportunity to recognize the true
variances from project estimates, may lack information to identify trends, or identify
ways to improve RFS processes.
Right-of-way Budgets Are Not Designed to Allow Retrospective Analysis of Cost
Increases
We also found that there is not a baseline, or otherwise static budget assigned to the right-of-
way costs in project development. Rather, the Right of Way Group manages
acquisition costs against the “current” budgets that are updated semi-annually with the
most recent cost estimates. As a result, budgets for right-of-way increase as estimated
costs and budgets increase. While it is reasonable, even predictable, that real estate costs
appreciate over time and necessitate budget revisions to appropriately account for them,
the lack of comparison to a baseline allows costs to increase period after period without
careful consideration of the whole picture; the floating budget does not provide an
accurate retrospective for assessing if certain cost increases over an extended period were
appropriate.
Project Budgets Appear to be Unreliable Basis for Assessing Remaining Available
Funding
As noted earlier, for the purposes of ensuring that the remaining available funding is
sufficient to cover proposed program changes, ADOT maintains a current cash flow
analysis to monitor and project its available funding through the estimated completion of
the Accelerated Program by the end of 2007. According to ADOT, the projected
expenditures in this analysis are based on 30 percent design estimates. Initially we found
it difficult to obtain the 30 percent design estimates for several projects13, though
eventually documentation of some form was provided for all the projects, in our sample,
we found the deviations between the 30 percent design budget and actual expenditures to
vary from as low as 6 percent to over 205 percent. Moreover, we also found wide
variances in the budget to actual expenditures considering “original budgets” (the project
budget as it is recorded in ADOT’s accounting system). We found under-budget
variances of “original” budgets tp actual expenditures from 100 percent under budget to
130 percent over budget. Some of the projects we selected were still open and accruing
costs, and some were closed. The closed projects were 6.5 percent over budget on
13 ADOT was eventually able to provide all of them.
sjobergevashenk
34
average. ADOT, MAG, and STB may want to take a closer look at how to better
correlate projected expenditures with actual expenditures.
Additional Evaluative Data May Also be Helpful to RFS Oversight
In addition to evaluating the historical context for proposed project changes, and
specifically looking for trends in types of changes, ADOT, MAG, and STB should
develop and identify key performance indicators both for individual projects and the
program overall which are reported as part of any discussion about changes to a project
or the Accelerated Program. Beyond, for example, simply reporting the variance
between a project’s original budget and a proposed budget, ADOT should set a goal for
how much actual expenditures will ultimately deviate from the original budget, and in
presenting the justification for the newly proposed change, indicate whether it may
prevent ADOT from meeting this goal.
Similarly, we reviewed ADOT’s current Performance Measures Reports that captures
several statistics related to project change request characteristics. However, these
measures are not set in any context to ascertain the relative significance or acceptability
of the results; ADOT has not established benchmarks, targets, or objectives for
comparative purposes. For example, one report showed the number and type of “After
Stage Two” change requests considered by the PRB between July 2004 and December
2004, but the report did not indicate expected conditions or acceptability, thus making
these statistics and the overall report less informative and less valuable as a tool for
assessing outcomes. Moreover, while ADOT reported in response to the 2000 RFS audit
that it would develop new measures that focus on cost control, citizen outreach and plan
quality, it still has not adequately developed measures to assess performance and the cost
efficiency and effectiveness of its operations. While it might be difficult to set a fair and
reasonable goal for the number of change requests made for the program overall, setting,
articulating, and tracking the program’s success at meeting performance goals—for
example, delivering projects within 95 percent of the original schedule, or having actual
project costs come within 10 percent of the first design estimate (plus inflation)—provide
evaluative tools for program oversight.
Benchmarks, goals and targets may be difficult to develop, reluctance to set such goals is
understandable, as initially, they may appear arbitrary and or suggest to an external
audience more conclusive than appropriate. Nonetheless, the purpose of setting such
goals is not to encourage internal or external audiences to view failure to meet such goals
as indicators of poor performance, but rather as markers to monitor activities and triggers
for investigating unexpected results. Changes that result in managing using performance
indicators may bring about improvements in estimating or budgeting or design
considerations that provide a greater likelihood that future projects will meet and/or
exceed the goals.
sjobergevashenk
35
Program and Project Data, Currently Residing in Decentralized
Systems, Should be Consolidated
As discussed earlier, for the early years of the RFS, and thus for many of the early
Accelerated Program projects which were underway from as early as 1986, historical data
about original (and/or 30 percent design) budgets, scope, and timelines — as well as
actual costs — is simply not available in easily manipulated electronic formats.
However, we found that the data for projects and aspects of the Accelerated Program
which have come on-line since the mid-1990s is more consistently collected in electronic
form and thus available for a level of analysis not possible for earlier projects. The
complication is that while most of the data that would be needed for ADOT to provide
historical context for newer projects (or projects in the future) is stored in databases or
other electronic files, at this point, they are scattered in several data bases. Specifically,
different pieces of data are often housed in different databases—many without the ability
to “talk” to one another for the purposes of data extraction and analysis—and require
intensive manual manipulation to use for such purposes. Currently, ADOT is in the
process of developing a data warehouse to consolidate various information sources and
software applications.
Data is Currently in a Number of Decentralized Systems
Specifically, we found that each of the several specialty divisions which have some level
of input or responsibility for RFS projects (for example, Right of Way, Phoenix
Construction Group, Valley Project Management, Finance etc.), uses at least one separate
system for tracking certain aspects of a project’s development. While some of these
systems are “compatible” in the sense that they can recognize each other’s data and
update accordingly, most of these systems are “incompatible” and cannot communicate.
In other words, project data in one system cannot be combined with data for the same
project in another system. As a result, ADOT’s various systems and specialty divisions
produce several different reports which may at times be redundant but which, together,
ultimately fill in most of the project development documentation. However, reviewing
any single project’s development—not to mention the entire RFS program’s
development—requires significant manual data manipulation and analysis as well as a
unique level of familiarity with where certain data resides.
As an example of this effect at the project level, we found data from the Right-of-Way
Group difficult to connect with the data from other specialty groups within ADOT for the
purposes of assessing the effects of right-of-way acquisition on projects’ timing and
budgets. In fact, we were warned in collecting data for a sample of projects to expect
inaccuracies, as the data would be compiled from multiple computer systems and
programs. For example, initially we were unable to correctly match parcels of land to
ADOT’s current project identifiers for eight of our sample of 20 projects; subsequently
sjobergevashenk
36
we were provided correct project numbers but it was still necessary to enlist the help of
specific staff members who were familiar with the ways the data correlated.
At a program level, to a large degree this is the method by which ADOT’s semi-annual
Life Cycle Certification Report is compiled. ADOT has no single system capable of
gathering information from various specialty divisions within RFS that is needed to
produce the Life Cycle Certification’s overview of the Accelerated Program’s
development and progress. Rather, ADOT has a full-time dedicated staff member who is
charged with the task of the compilation of data from the following sources: ADOT’s
Finance Group, ADOT’s general consultant, ADOT’s Phoenix Construction Group,
ADOT’s Valley Project Management Group, ADOT’s Right-of-Way Group, the deputy
state engineer who oversees the RFS, and several monthly, bi-weekly, and weekly
meetings regarding specific Accelerated Program projects and overall program
development.
To a certain degree, the need for greater data consolidation was also identified in a prior
audit14 when the following recommendations were made:
o Use a project management system as a tool to monitor costs as part of the project
and track overall program status.
o Fully utilize the project management system by inputting the necessary data so
that reliable reports can be produced in a timely manner. Evaluate its reports to
determine which reports can be eliminated or consolidated with the intent to
reduce duplication of efforts and the number of reports.
To ensure more efficient information gathering, analysis and dissemination throughout
the organization, ADOT should consider how to make its information systems talk to
each other. Specifically, a single system that combined all financial records, technical
and administrative data and information for all projects funded in the RFS program could
serve an important administrative function for the RFS Life Cycle Program and greatly
alleviate the burden of manual staff analysis and manipulation. Until such a system can
be instituted, however, ADOT can still take better advantage of the data currently
available for newer and future projects through multiple systems and sources to provide
historical reviews of project performance as part of the RFS oversight practices.
14 “Performance Audit of the Arizona Department of Transportation: a Review of the Maricopa County
Regional Freeway System,” Sjoberg Evashenk Consulting, July 2000
sjobergevashenk
37
CHAPTER 4
New Phase of RFS Development and Construction
Offers Opportunities to Apply Lessons From the
Accelerated Program
In November 2004, Maricopa County voters passed Proposition 400, a twenty-year
extension of the excise tax which originally created and has helped to fund the RFS —
and which was due to expire at the end of 2005. As a result, in 2006, a new influx of
funding will take effect to meet Maricopa County’s changing transportation needs. The
new MAG Regional Transportation Plan components, made possible by the new funding,
include 344 miles of new and improved freeway and highways along with an ambitious
arterial and streets development and improvement program and new light rail and bus
transit development.
While the streets development and alternative transit components of the new plan are
outside of ADOT’s purview, the further development of the RFS will be subject to the
same program and project management and oversight model as the one currently applied
to the Accelerated Program. Specifically, ADOT will manage a new 20 year RFS
program, overseen by MAG and STB, involving the creation of new highway corridors,
the addition of new lanes to most of the existing corridors, new or improved traffic
interchanges on several existing corridors, installation of a comprehensive computerized
freeway management system, application of rubberized asphalt throughout the system,
and minor maintenance projects. This provides an exceptional opportunity for ADOT,
MAG, and STB to apply lessons learned over the last 20 years, including as demonstrated
by the apparent success of the Accelerated Program, and avoid many of the problems that
plagued the original RFS plan such as funding shortfalls, reduced scope and extended
timelines.
With only two years remaining to bring the Accelerated Program to completion, ADOT,
MAG, and STB may be limited by time to implement many recommendations resulting
from this audit in time to realize their full potential on the Accelerated Program.
However, they will be no less applicable to the new RFS programming, and ADOT,
MAG and the STB should bring forward the successful practices and policies developed
during the Accelerated Program and take the opportunity of new programming to
implement the recommendations for improvement identified in this report.
One of the heralded aspects of Proposition 400 is that it establishes “revenue firewalls”
which require the funding for the different components of the new regional plan to be
sjobergevashenk
38
kept separate. Funding currently earmarked specifically for the RFS, streets, or transit
components cannot be transferred for the purposes of covering shortfalls in one area and
thus inhibit the completion of programming in another area. As the new funding
authorized by Proposition 400 will come on-line prior to the completion of the
Accelerated Program, we also encourage ADOT, MAG, and the STB to take the
additional step of establishing, in effect, a similar “firewall” between the Accelerated
Program and the new RFS programming. Specifically, the successful completion of the
Accelerated Program should entail completion within the remaining available funding
under the original transportation excise tax. Especially with successful completion by the
end of 2007 so seemingly likely at this point, ADOT, MAG, and STB deserve the
recognition of having applied so many lessons from the early years of the RFS to develop
and deliver the Accelerated Program, which will only be possible if it can be clearly
distinguished from the implementation of new funding streams and new RFS plans.
sjobergevashenk
39
CHAPTER 5
Conclusions and Recommendations
Overall, the conclusions drawn from this audit are largely positive. ADOT’s
performance since 2000, and the adoption of the Accelerated Program, suggests the
likelihood that Maricopa County residents will see completion of the Accelerated
Program on time and within the remaining available funding. Further, this appears to be
a function of improved project and program management processes that align with best
practices in the industry and solid controls on change orders instituted by ADOT and its
oversight partners, MAG and STB.
We have identified opportunities for improved management and oversight practices and
processes, specifically with regard to:
o ADOT’s project documentation polices and practices;
o Historical review and additional evaluative information that could be used in
ADOT’s, MAG’s and STB’s RFS oversight processes; and,
o Consolidation of currently decentralized program and project data.
However, improvements in each of these areas would only support ADOT, MAG and
STB’s greater success; none currently pose barriers to the likely completion of the
Accelerated Program. They are identified specifically in support of the strategic values
of “excellence and continuous improvement”—important to all governmental enterprise,
and specifically identified in ADOT’s strategic plan. Because there are only two years in
which they can be addressed for the Accelerated Program, they are also presented as
opportunities for applying “lessons learned” to the implementation of new initiatives
under Proposition 400.
To that end, our recommendations focus on these opportunities for improvement and
additionally recognize the importance of ensuring a “firewall” in the accounting for the
Accelerated Program and new programming made possible by the passage of Proposition
400 (the transportation excise tax extension).
We have addressed our recommendations to particular entities accordingly.
Recommendations for ADOT
1. Continue to improve and implement successful project management practices,
both through the completion of the Accelerated Program and in the
implementation of new RFS programming, including the current change order
review and approval process.
sjobergevashenk
40
2. Develop and implement a memorialization and retention policy for documentation
of approved project changes and key project decisions which enables easy
documentation location and review.
a. ADOT should consider developing a checklist to keep in the centralized
project files that indicates all the types of documentation to be included in
the file, so that at any point, a project file could reasonably be expected to
provide a comprehensive overview of changes to the project and/or other
key project decisions throughout the project’s development.
3. Develop a single database, or a system of coordinated databases, which is capable
of generating reports that track, present, and explain the history of a project’s
incremental and cumulative development including budgeted to actual costs,
timeline and scope changes. Ideally, this system should allow queries and reports
for individual projects, whole corridors, and the Accelerated Program (and/or
Proposition 400 program) overall.
a. Additionally, in the process of establishing a method of retrieving
consolidated data, we recommend that ADOT examine opportunities to
allocate indirect and/or apply direct project costs currently captured as
“system-wide” expenditures for the purposes of Life Cycle Certification
Reporting on corridor-specific obligations.
b. We also recommend that ADOT define and track right-of-way acquisition
budgets and budget changes to watch for opportunities to increase its
ability to anticipate the impact of the right-of-way acquisition process on
overall project budget.
Recommendations for ADOT, MAG and STB
4. Require comparisons of historical budgets and estimated completion dates—and
the memorialized explanations for all prior changes to them—when evaluating
newly proposed changes. Proposed changes should also require the presentation
of impact on key performance indicators established for the RFS program and
other metrics of comparison to enable analysis of cost-efficiency and
effectiveness (e.g. budgeted, estimated and actual costs per mile for similar
projects).
5. Define key performance indicators for the RFS program that will help ADOT,
MAG and STB recognize trends of performance that might trigger greater
analysis for opportunities to improve cost-efficiency and effectiveness. For
example, consider setting and tracking program success at delivering projects
within 95 percent the original schedule, or having actual project costs come
within 10 percent of the first design estimate (plus inflation)—and/or other
indicators, as proposed by ADOT, MAG, and/or STB.
sjobergevashenk
41
6. Require separate tracking, monitoring, and reporting on the completion, including
funding and actual costs, of the Accelerated Program separately of the funding,
costs, and timelines for initiatives resulting from the passage of Proposition 400.
sjobergevashenk
42
Appendix A
Response to Stakeholder Issues
As part of our audit, we reviewed 13 areas of inquiry identified by Arizona stakeholders
and the Arizona Auditor General. Several of these areas were related to our primary
reportable issues, discussed in the body of this report. However, we address each of these
separate topics below.
Statutorily Mandated Issues
1. As required by A.R.S. Section 41-1279.03 (A)(6)(a), review “past expenditures
and future planned expenditures of the transportation excise tax and determine
the impact of the expenditures in solving transportation problems within the
county.” This includes assessing the appropriateness of the expenditures, and
assessing how traffic has been impacted on various highway routes since the
transportation excise tax passed; i.e. miles per hour in 1985 and currently,
percent of person miles traveled by level of service, etc.
Since 1991, ADOT has developed and distributed a Life Cycle Certification report
every six months that reports major accomplishment in building the freeway system
and past and future planned expenditures, including the revenues and expenditures for
projects funded through the Maricopa County transportation excise tax also referred
to as the Regional Area Road Fund (RARF), ADOT’s share of the Highway User
Revenue Fund (HURF) and other local revenues.
To determine the appropriateness of expenditures, we selected fourteen expenditure
items, including right of way, design, construction, utility, and system-wide
expenditures. All expenditures we reviewed appeared appropriate under ARS 41-
1279.03. In our review of the underlying expense support, we were able to conclude
that all of the expenditure items we reviewed were related to the design, construction,
right of way, utility or system-wide charges for the Regional Freeway System
projects.
To determine the impact of the freeways built since the transportation excise tax
passed, we compared traffic projections made in 1993, 1996, 1999 and 2000 to the
actual vehicle counts measured in 2003. Overall, we found that the actual traffic
volume has surpassed the projected vehicle counts. Generally, between 1993 and
1999, the projections were between 17 to 21 percent lower than the actual counts
taken in 2003. However, the projections made in 2000, as compared to the actual
counts in 2003, on the average were seven percent higher than the actual counts.
The increased number of vehicle counts in excess of the projections developed in
1993 validate a concern prevailing among many Maricopa county citizens as well as
sjobergevashenk
43
MAG and ADOT staff that that despite the fact that RFS freeways are being built in
accordance with the Accelerated Program, the increasing population contributes to
more vehicles per household and higher than expected congestion on the freeways.
Over the last ten years, the Phoenix region has shown exponential growth beyond the
1993 estimates. United States Census data shows that exceptional growth is
occurring throughout the southwestern United States. In particular, the Greater
Phoenix population has increased by 59 percent since 1990, compared to the national
rate of only 17 percent.
Further, our review of several MAG studies, including, “2001 Traffic Quality on the
MAG Regional Freeway System,” revealed that due to the rapid population growth in
the area, the RFS freeways are operating at over than the expected capacity levels and
traffic congestion is noted despite the fact that ADOT continues to open more and
more segments of the RFS freeways.
2. As required by A.R.S. Section 41-1279.03(A)(6)(b), review “projects completed
to date and projects to be completed during the remaining years in which the
transportation excise tax is in effect.” Provide a comprehensive listing of all
projects constructed with transportation excise tax monies, projects remaining,
the cost of each project, and the number of miles associated with each project.
As noted previously, ADOT’s Life Cycle Certification report covers RFS
performance during the period from the beginning of the 1986 to 2005. The report
shows revenues and expenditures associated with the program, and describes major
accomplishments on the RFS projects. The information in the Life Cycle report is
supported by project-specific data that reside in various systems such as construction
databases and design consultant’s electronic files to list a few. As required by A.R.S.
Section 41-1279.03 (A)(6)(b), we reviewed projects completed to date and projects to
be completed by the end of 2007. A comprehensive listing of theses projects derived
from ADOT internal data is presented in the Appendix D of this report.
While ADOT does not have a single information system capable of generating a
comprehensive listing of all projects constructed with transportation excise monies,
projects remaining, with costs of each project, and the number of miles associated
with each project, such information is available in parts, in aggregate, or on a project-by-
project basis. We did not test all of the underlying systems used to compile the
Life Cycle Certification Report within the scope of this audit.
3. As required by A.R.S. Section 41-1279.03(a)(6)(c), review, determine, and report
whether the distribution of highway user revenues complies with A.R.S. Title 28,
Chapter 18, Article 2 (Section 28-6531 et seq.), which specifically details the
formula for distributing highway user revenues.
sjobergevashenk
44
Total HURF revenues, as required by Statute, should be distributed in the following
way:
• 50.5 percent to the State Highway Fund; and of this portion, at least 12.6 percent
should be allocated as follows:
o 75 percent to counties with a population over 1,200,000
o 25 percent to counties with populations over 400,000
but less than 1,200,000
• 3 percent to cities with populations over 300,000
• 27.5 percent to incorporated cities and towns
• 19 percent to all counties
Based on the review of the revenue collections documentation provided by the Motor
Vehicle Division and the ADOT revenue distribution records, we determined that
ADOT distributes HURF in accordance with the Arizona Revised Statute Title 28-
6538. ADOT complies with the revenue distribution provisions of this Statute.
Program Management Issues
4. Review and evaluate the process used to recommend and select transportation
projects for funding, as well as whether there is a system in place to reconsider
or revisit project and their priority within the system to allow for changes in
transportation needs in Maricopa County, and identify any recommendations
for improvement.
The Maricopa Association of Governments (MAG) is a Council of Governments that
serves as the Metropolitan Planning Organization (MPO) for Maricopa County and
Apache Junction. MAG provides a regional forum for analysis, discussion and
resolution of issues including areas of transportation, air quality, environment,
regional development and social services.
MAG has the statutory power to review and prioritize projects for the Regional
Freeway as defined in ARS 28-6354. MAG works closely with ADOT on setting the
priorities for the RFS and making any changes (if needed) to the existing project
schedules and budgets. The project priorities for the entire Regional Freeway System
were initially established in 1985. Since the program’s inception, the project
priorities have been reviewed several times, but have not been re-prioritized since
1999.
Project priorities are based on a 20-year traffic projections model that generally fairly
reflects the needs of the MAG growing region. However, due to the exponential
population growth in the area, which increases the demand for the freeways use, the
growing concern remains that the rate of freeway construction can hardly meet the
quickly rising need for more freeways.
sjobergevashenk
45
Nonetheless, we found MAG’s process of prioritizing projects sound. MAG
regularly conducts studies to measure traffic indicators, including transportation
volume studies, such as household surveys, MAG Regional Travel time and travel
speed studies, Phoenix External Travel Surveys, Traffic Quality on the MAG
Regional Freeway System and MAG Regional Congestion studies. It uses these
studies to evaluate the following prioritization criteria:
1. Travel demand
2. Congestion relief
3. Air quality improvements
4. Accident reduction
5. Cost effectiveness
6. Joint funding
7. Social and community impacts
8. System continuity and mobility
9. Establishment of a complete freeway system as rapidly as possible
10. Construction of segments that serve regional needs
11. Construction of segments that provide connectivity with other elements
(Source: MAG Annual report)
We did not identify obvious improvements that could be made to this process.
5. Review and evaluate ADOT’s plan for maintaining the roadways constructed
with the ½ cent sales tax; i.e. pavement preservation, landscaping upkeep, road
maintenance, etc.
According to the ADOT Maintenance Director, the maintenance spending for the
Regional Freeway System has been generally appropriated through the State budget.
Proposition 300, establishing the one-half cent transportation excise tax approved in
October 1985, covers only the construction of controlled-access highways. It makes
no allowances for maintenance.
Currently, ADOT estimates that the average annual costs to operate and maintain a
standard new mile of a 6-lane urban freeway equal approximately $123,400 a year.
Further, ADOT’s long-range planning estimates include an expectation that
maintenance costs per mile increase after the initial four years of highway operation
at a rate of an additional $1,120 per mile per year. ADOT’s maintenance plan
includes several types of activities, including sweeping, landscaping, litter control,
accidents and traffic control, freeway management system, lighting and electricity,
signing and striping, drainage, gaffitti removal and pavement maintenance. With the
passage of Proposition 400, $279 million of sales tax funds are allocated to ADOT for
landscape maintenance and litter control to augment the funding that ADOT already
has for maintenance in the MAG region.
sjobergevashenk
46
6. Determine the average cost per highway mile funded by the ½ cent sales tax in
Maricopa County as compared to other state’s highway programs and/or
national construction cost indexes.
According to our transportation engineering consultant, the nation-wide standards
related to the cost per mile indicators are generally expressed in capital cost per lane
mile. While the capital costs such as direct labor, materials and equipment are
affected by external factors such as cost of living, relative price of the construction
supplies and many others, additional costs such as the right of way, design, utility and
landscape typically fluctuate to a greater degree, when comparing highway
construction costs across different territories and different states.
Based on our review of the capital construction costs for a selected number of
segments on the Regional Freeway System, we found that the cost varied between
$2.38 million to $3.78 million per lane mile. Our transportation expert asserted that
such cost indicators are comparable with the construction cost standards adopted by
CalTrans, where the actual costs per lane mile should be within a $5 million range.
It should also be noted that in April 2004, MAG reported that the total cost per RFS
centerline mile was $39 million. This figure represented all costs associated with the
design, property acquisition, utilities, landscape and construction of the freeway.
7. Update the MAG program features identified in the 2000 performance audit
report.
The MAG program features were updated to indicate progress made since 2000 and
are included in this report in Appendix C.
Traffic Projection Issues
8. Identify methods used by ADOT and MAG to determine areas in Maricopa
County with the greatest transportation needs and review and evaluate these
methods for validity and reliability. For example, if traffic projection models
are used to evaluated transportation projects, are these models statistically valid
and reliable?
To determine the areas in Maricopa County with the greatest transportation needs,
MAG uses a trip based approach, built on a modified industry-standard four-step
modeling process to predict travel demand. The process incorporates data such as
travel characteristics and usage of transit services, as well as various socioeconomic
data (including income, transportation mode preferences, land use, population, and
recreational and work patterns). MAG uses the model’s long range travel demand
forecast output as part of various analyses, including feasibility analysis for transit
capital improvements, evaluations of the impacts of transportation investments, air
sjobergevashenk
47
quality analysis, analysis of travel reduction programs, travel demand management
strategies, and congestion management—all of which are utilized in transportation
plan development.
We found the MAG transportation planning process to be continuously updated and
improved through the conduct and analysis of various travel volume studies,
including MAG regional congestion studies, household surveys, transportation studies
of travel times, travel surveys, traffic volume research and analysis. These studies,
conducted by MAG staff, external consultants hired by MAG, and other local entities,
ensure that MAG’s travel demand forecast modeling process continues to provide a
reasonable representation of current and future traffic conditions and thus more
accurately determine the areas with the greatest need for transportation
improvements.
9. Review and evaluate the latest 20-year traffic projections and the
viability/appropriateness of the model(s) used.
To evaluate the current 20 year traffic projections and the viability and
appropriateness of the model used, we reviewed industry and federal literature related
to traffic modeling and traffic demand projection, developed a general set of criteria
based on the literature, and compared the MAG model to that criteria. Based on this
review and comparison, we determined that the MAG model was consistent with
industry criteria, was viable and appropriate, and thus, that the current 20 year
projections were reasonable.
Specifically, MAG’s modeling process was based on the widely used trip-based
approach, four-step travel demand forecasting method that included a majority of the
input data identified by industry literature. Further, MAG’s modeling process
included interim and final output calibration/validation techniques developed to
ensure the model generated reliable projections; the calibration/validation results
generally met or exceeded those identified in industry literature. Additionally, MAG
had a process of continually improving the model to ensure it remained sensitive to
changes in input data and produced accurate projections.
Right of Way Issues
10. Compare and contrast Arizona’s state laws regarding transportation right of
way issues and standards of appraisal with Federal laws regarding
transportation right of way and criteria for appraisals.
To compare and contrast Arizona’s state laws regarding transportation right of way
issues and standards of appraisal with federal laws and regulations, we reviewed,
compared, and contrasted the relevant Arizona Revised Statutes, federal statutes, and
Code of Federal Regulations as well as the ADOT Right of Way Group’s Procedures
sjobergevashenk
48
Manual. Based on this review and comparison, we did not note any discrepancies
between Arizona’s state laws and federal laws and regulations related to
transportation right of way or standards for appraisals. Further, ADOT’s right of way
acquisition process appeared to be consistent with both state and federal laws
requiring fair market value appraisals, negotiations with property owners, and
condemnation proceedings if, or when, necessary.
11. Review and evaluate ADOT’s efforts to preserve the transportation corridors
needed for Maricopa County Regional Freeway System.
To review and evaluate ADOT’s efforts to preserve the transportation corridors
needed for the Regional Freeway System, we interviewed key executive and
management level staff including the deputy state engineer over the Intermodal
Transportation Division (responsible for the highway development process), the chief
Right of Way agent, and the assistant chief Right of Way agent as well as reviewed
relevant internal procedural documents related to right of way. Based on the
interviews and review of documents, we determined ADOT efforts to preserve
transportation corridors was reasonable.
Specifically, although a majority of the “corridors” for the RFS had already been
acquired and constructed upon, we were informed most were designed and built using
a flexible and expandable ultimate route concept. In other words, most of the RFS
projects were designed and built with the ability to expand capacity by opening a
closed median or paving a shoulder, which “preserved” future expansion corridors.
Additionally, for the preservation of upcoming projects, ADOT continued to use the
more successful historical practices to preserve right of way. Specifically, the Project
Management Section continued to utilize a Red Letter coordinator who worked with
local agencies in the “Red Letter” process. Further, ADOT continued to work with
local developers planning projects in, next to, or near the RFS right of way to
minimize the impact of the highway on the development and the development’s
impact on the Regional Freeway System.
12. Review a sample of ADOT’s prior purchases of right of way for the Maricopa
County Regional Freeway System and compare what was actually paid for the
land versus what the land’s fair market value was at the time of purchase. If
possible, comment on what influence the planned highway project had on the
price paid for the land purchased for right of way and whether the method used
to determine the purchase price complied with Arizona law.
To review a sample of right of way acquisitions, we obtained and reviewed a universe
of acquisitions between January 1, 2000 and December 31, 2004 classified by
corridor, which included appraisal values, acquisition prices, and other relevant
statistics such as size of acquisition. We selected a sample of acquisitions from the
universe and reviewed ADOT’s Right of Way Group’s files for each acquisition.
sjobergevashenk
49
Based on our review of files, we determined ADOT generally paid Fair Market
Value—or slightly more—for its acquisitions and the determination of purchase price
complied with Arizona law.
Specifically, ARS 28-7091 indicates fair market value is the most probable price for
which a property would sell in the open market. Further, the Federal Highway
Administration (FHWA) Right of Way Program Development Guide noted an
appraisal could be used to determine an approximate fair market value. Using the
FHWA concept to determine if fair market value had been paid, we reviewed right of
way purchases in total and noted the average variance between acquisition price and
appraisal value was $26,890, or approximately 24 percent more than the average
appraised value and the overall average variance between judgment price
(condemnation) and appraisal value was $550,071, or nearly 61 percent more than the
appraised value. In our sample of 20 acquisitions, we found that ADOT acquired 4
properties for approximately the appraised value (within 5.6 percent of the appraisal
value); 2 properties for less than the appraised value; and the remaining 14 properties
above the appraisal value.
Alternative Transportation Issues
13. What percent or amount of the transportation excise tax monies has gone into
funding alternative modes of transportation since year 2000, and what
specifically has the money funded since 2000?
According to ARS 28-6305, ADOT is required to transfer $5 million of the excise
sales tax monies each fiscal year to the Public Transportation Authority fund and
adjust the distribution by the annual percent change for the previous calendar year in
the “GDP price deflator” as defined in ARS 41-563. In 2001 ADOT’s annual
distribution to the Regional Public Transportation Authority (RPTA) was $7.19
million, which was approximately 2.7 percent of the excise tax monies. Although the
total amount distributed to RPTA in 2005 increased to just over $7.71 million, it was
still only 2.5 percent of the excise tax monies received by ADOT. Further, the RPTA
used these excise tax monies to fund alternative modes of transportation, although
some of the excise tax money funded administrative and overhead expenses. A
majority of the excise tax money—65 percent or more of the allocated amount in each
of the fiscal years—was budgeted and spent on projects such as fixed route transit
services and community funded transportation.
sjobergevashenk
50
Appendix B
Status of 2000 Performance Audit Recommendations
Recommendation
Fully
Implemented
Partially
Implemented
Not
Implemented
No Longer
Appropriate
1. Clearly define the roles, responsibilities,
and accountabilities of all members of a
project team. Specifically,

Copyright to this resource is held by the creating agency and is provided here for educational purposes only. It may not be downloaded, reproduced or distributed in any format without written permission of the creating agency. Any attempt to circumvent the access controls placed on this file is a violation of United States and international copyright laws, and is subject to criminal prosecution.

Performance Audit of
The Arizona Department of Transportation
A Review of the Oversight and Management of the
Maricopa County Regional Freeway System
June 2005
455 Capitol Mall•Suite 700•Sacramento, California•95814 •Tel 916.443.1300•Fax 916.443.1350
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
June 30, 2005
The Honorable Ken Bennett, President
Arizona State Senate
The Honorable Jim Weiers, Speaker
Arizona House of Representatives
Members of the Arizona Legislature
The Honorable Janet Napolitano, Governor
Mr. Victor Mendez, Director
Arizona Department of Transportation
Transmitted herewith is a report of the Auditor General, A Performance Audit of the Oversight
and Management of the Maricopa County Regional Freeway System. This audit was
conducted by the consulting firm Sjoberg Evashenk Consulting under contract with the Auditor
General and was in response to the requirements of A.R.S. §41-1279.03.
Responses to the audit from the Department of Transportation, Maricopa County Association
of Governments, and the State Transportation Board can be found at the end of the audit
report. As outlined in their responses, the parties agree with all of the findings and plan to
implement all of the recommendations addressed to them.
My staff and I will be pleased to discuss or clarify items in the report.
This report will be released to the public on July 1, 2005.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
cc: Maricopa Association of Governments
State Transportation Board
June 24, 2005
Ms. Debra Davenport
Auditor General
Arizona Office of Auditor General
2910 N. 44th Street, Suite 410
Phoenix, Arizona 85018-7243
Dear Ms. Davenport:
Sjoberg Evashenk Consulting is pleased to submit our final report for the Performance
Audit of the Arizona Department of Transportation: A Review of the Oversight and
Management of the Maricopa County Regional Freeway System. This report assesses the
Arizona Department of Transportation’s (ADOT) management over the planning and
construction of the Regional Freeway System and addresses issues raised by interested
parties and answers questions mandated by Arizona statutes.
Our review concludes that past performance indicates that ADOT will likely complete the
remaining Regional Freeway System projects by the end of 2007, the statutorily
mandated deadline. Specifically, since 2000, ADOT has demonstrated the ability to meet
targeted completion dates for various phases of highway construction, and has delivered
these projects within a reasonable deviation from their budgets. However, we did find
that the collaborative oversight of the Regional Freeway System by ADOT, the State
Transportation Board, and the Maricopa Association of Governments should be
broadened to include tracking more historically-based performance and budget measures,
and in fact, project data are now being captured that can be employed for such reviews.
Moreover, we recommend that these advances be transitioned to Proposition 400 projects
as ADOT, the State Transportation Board and the Maricopa Association of Governments
begin to implement this measure.
We appreciate the opportunity to have served the Office of the Auditor General and it has
been our pleasure to work with you. We also appreciate the cooperation we received
from all those who assisted us throughout our review including ADOT, the State
Transportation Board, the Maricopa Association of Governments, and your staff.
Respectfully Submitted,
Kurt R. Sjoberg
Chairman
sjobergevashenk
i
Table of Contents
List of Figures and Tables .................................................................................ii
Executive Summary............................................................................................1
Chapter 1: Introduction and Background.................................................5
Chapter 2: ADOT’s historical performance indicates that ADOT is likely
to complete the remaining Accelerated Program projects by
the end of 2007.......................................................................15
Chapter 3: ADOT’s, MAG’s, and STB’s efforts at analyzing the RFS
program should be broadened .............................................30
Chapter 4: New phase of RFS development and construction offers
opportunities to apply lessons from the Accelerated
Program ..................................................................................37
Chapter 5: Conclusions and Recommendations ...................................39
Appendix A: Response to Stakeholder Issues ..........................................42
Appendix B: Status of 2000 Performance Audit Recommendations.......50
Appendix C: Regional Freeway System Program Features .....................52
Appendix D: Comprehensive Listing of Projects......................................53
Response to the Audit from ADOT..................................... R-1
Response to the Audit from STB........................................ R-4
Response to the Audit from MAG....................................... R-6
sjobergevashenk
ii
List of Figures and Tables
Figure 1: Accelerated Program, January 2000 Life Cycle
Certification ..............................................................................6
Figure 2: Accelerated Program Funding Sources 2000-2004...............7
Figure 3: Accelerated Program, January 2005 Life Cycle
Certification ............................................................................16
Figure 4: Status of Accelerated Program Miles by Stage, as of
January 2005 ..........................................................................17
Figure 5: Total Available Funding through 2007 (in thousands)........20
Table 1: Status of Accelerated Program Miles by Corridor, as of
January 2005 ..........................................................................17
Table 2: Significant Vacancies in Critical Department Groups ........28
sjobergevashenk
1
Executive Summary
In 1985, Maricopa County voters approved a sales tax initiative that authorized the
Arizona Department of Transportation (ADOT) to embark on a 20-year program to build
a comprehensive network of regional freeways in the Phoenix metropolitan area. After
several earlier plans to manage and deliver the proposed network produced less than
hoped for results, in 1999 the Governor, State Legislature, ADOT, the Maricopa
Association of Governments, and the State Transportation Board worked together to
develop the “2007 Accelerated Program” which revised the scope, funding streams and
timeline of the proposed network. In 2000, the Accelerated Program was implemented,
with plans to complete the network by the end of 2007.
In 1992, additional legislation also set into place a requirement for regular performance
audits of the Maricopa County Regional Freeway System (RFS). This report addresses
the findings of the fourth and final audit of the RFS program conceived and funded in
19851. The Office of the Auditor General contracted with Sjoberg Evashenk Consulting,
Inc., to fulfill this requirement in 2005. The objective of the 2005 audit is to assess
ADOT’s management performance of the RFS, review specific areas of concern
identified by interested parties, address statutorily mandated questions, and recommend
ways to improve ADOT’s efficiency and effectiveness in fulfilling its overall program
responsibilities through the life of the existing transportation excise tax.
ADOT’s historical performance indicates that ADOT is likely to complete
the remaining Accelerated Program projects by 2007.
As of January 2005, the Accelerated Program was approximately 78 percent complete.
ADOT’s performance at managing the funding, design, engineering, right-of-way
acquisition and construction of the network, or the Maricopa Regional Freeway System
(RFS) since 2000 through January 2005, indicates that the department will most likely
complete the remaining 22 percent by the close of calendar year 2007. Specifically, we
found:
o ADOT’s performance since 2000 supports the likelihood of completing the
Accelerated Program on schedule
Since implementation of the Accelerated Program in 2000, ADOT has generally
demonstrated the ability to meet targeted completion dates for various phases of
highway construction, and within a reasonable deviation from budget.
1 Subsequent sales tax initiatives and the RFS programming that they enable are subject to separate audit
requirements.
sjobergevashenk
2
o Available funding appears sufficient to meet the remaining construction needs
As of January 2005, the total projected costs remaining for the program comprise
only 93 percent of the total remaining funding.
o ADOT’s project management procedures and processes, while they could be
better documented, are sound and functioning well
RFS design and construction is accomplished through a project management
structure which ensures a “cradle-to-grave” approach, enabling each phase of
highway design and development to inform every other appropriately, and in
accordance with best practices within the transportation industry. Further, the
department’s controls for budget and timeline changes are appropriate, though
documentation of key project developments could be improved.
o A more absolute conclusion on the likelihood of completion is impossible
Since unpredictable delays and cost overruns are not atypical of large-scale
construction projects, we cannot conclude unequivocally that the RFS will be
completed on time. Further, the Accelerated Program may face some tight
timelines as it nears completion with significant staffing vacancy issues.
ADOT’s, MAG’s, and STB’s efforts at analyzing the RFS program should
be broadened.
Oversight of the RFS is provided collaboratively by the State Transportation Board
(STB), Maricopa Association of Governments (MAG), and ADOT2. Collectively, these
organizations share (1) an explicit responsibility to deliver the Accelerated Program on
time and within the available funding, and (2) an implicit responsibility to assure the
RFS’s cost-efficiency and effectiveness. This audit recognizes the success of ADOT,
MAG and STB in serving the first responsibility of bringing the RFS near completion on-time
and on-budget. Keeping this success in mind, we also identified several
opportunities to help meet ADOT’s goal of “excellence and continuous improvement” in
achieving cost-efficiency and effectiveness. Specifically, we believe:
o Oversight processes should include historical review of projects’ progress when
evaluating budgetary or timeline revisions
The types of information presented in support of proposed project and program
changes to the Accelerated Program lack historical context—some of which is not
available for projects initiated in the 1980s or early 1990s. However, even for
projects initiated since the establishment of the Accelerated Program, decisions to
approve proposed changes are made based upon the support for the current
2 The Citizens Transportation Oversight Committee also has review and advisory responsibilities for
oversight of the RFS, though it does not have any authority to approve or disapprove ADOT plans or
proposals.
sjobergevashenk
3
proposal without reference to original budgets and estimated completion dates, or
any other incremental changes previously approved to the original budgets and
estimated completion dates. Only the most recently approved budget and
completion estimates are compared to the newly proposed changes. As a result,
the RFS oversight and management agencies may be missing useful evaluative
information regarding opportunities to improve RFS estimating processes, initial
considerations in design, and other processes with the potential to positively affect
cost-efficiency and effectiveness. Taking the opportunity to hold the program to
account for, expecting explanations of, and conducting analysis of historical
incremental and cumulative budget and timeline deviations would create
opportunities to learn how to improve delivery of the RFS projects.
o Program and project data, currently residing in decentralized systems, should be
consolidated
When the RFS was initiated in the 1980s and into the early 1990’s, ADOT’s
information technology systems did not capture early project budgets and
estimated timelines in a manner to make them available for analytical purposes
now. Since the mid-1990s, however, ADOT has collected most of the types of
data necessary for the historical review of changes in budget, scope and timeline
that would make a historical review of the cost-efficiency and effectiveness of
many of the more recently-initiated Accelerated Program projects possible.
Unfortunately, at this point, various pieces of the overall picture for both
individual projects and the program overall reside in decentralized databases and
require manual manipulation and analysis to study. It will be necessary to
consolidate Accelerated Program and project data to ease the staff analysis and
preparation of such historical review for both oversight and managerial purposes.
New phase of RFS development and construction offers opportunities to
apply lessons from the Accelerated Program
In November 2004, Maricopa County taxpayers passed Proposition 400, which extends
Maricopa County’s transportation excise tax for another 20 years beginning in 2006 and
initiates a new phase of RFS development and construction, including new highway
corridors, High-Occupancy Vehicle lanes, other lane expansions, and new traffic
interchanges.3 ADOT, MAG and the STB should bring forward the successful practices
and policies developed during the Accelerated Program and take the opportunity to apply
lessons learned about ways to further improve RFS management and oversight presented
in this report.
3 Proposition 400 also includes proposals for new non-RFS initiatives outside of ADOT management,
including an ambitious arterial and streets development and improvement program, and new light rail
development.
sjobergevashenk
4
Conclusions and Recommendations
Overall, the conclusions drawn from this audit are largely positive. The
recommendations primarily focus on opportunities for improvement in support of the
strategic values of “excellence and continuous improvement.” Further, they are made
with the expectation that their implementation offers benefit not only to the Accelerated
Program completion, but to implementation of Proposition 400 initiatives.
Recommendations for ADOT:
1. Continue to improve and implement successful project management practices.
2. Develop and implement a memorialization and retention policy for documentation
of approved project changes and key project decisions, including project file
checklists.
3. Develop a single database, or a system of coordinated databases, which is capable
of generating reports that track, present, and explain individual projects’ and the
overall program’s history.
Recommendations for ADOT, MAG and STB:
4. Require comparisons of historical budgets and estimated completion dates when
evaluating newly proposed changes as well as other useful evaluative data.
5. Define key performance indicators for the RFS program that will help ADOT,
MAG and STB recognize trends of performance.
6. Require separate tracking, monitoring, and reporting on the completion of the
Accelerated Program from new initiatives resulting from the passage of
Proposition 400.
sjobergevashenk
5
CHAPTER 1
Introduction and Background
Maricopa County Regional Freeway System (RFS) and the
Accelerated Program Life-Cycle
In October 1985, Maricopa County voters approved a 20-year, one-half cent sales tax
increase to fund a plan for developing approximately 230 miles of freeways and
expressways for metropolitan Phoenix — or, the Maricopa County Regional Freeway
System (RFS). However, in 1991, the revenue generated from the sales tax increase
appeared to be insufficient to complete the plan within the original 20-year time-period,
only 16 miles of the system had been completed in six years, and costs were escalating.
The Arizona Auditor General contracted a performance audit of the RFS and the resulting
report made numerous recommendations to improve the Arizona Department of
Transportation’s (ADOT) effectiveness in fulfilling its regional freeway program
responsibilities. Nonetheless, RFS progress continued to falter. In 1995, the governor
altered the original plan to reduce the scope of the overall program. In 1996, after the
Governor's Plan was adopted, MAG and ADOT jointly developed a plan that
incorporated additional funding and moved the RFS completion date to 2014. The new
program, as approved by the MAG Regional Council, extended the HURF allocation to
RFS and the allocation of additional MAG Federal funds to the RFS. Additionally, the
new plan scaled back the RFS system by 37 percent from 230 miles to 144 miles of
freeway. Other reductions included the elimination of certain highway lighting and
landscaping projects.
The 2007 Accelerated Program Life-Cycle
By 1999, the RFS was turning around—58 miles of the RFS had been completed. A
cooperative effort among ADOT, the Maricopa Association of Governments (MAG), the
governor, the legislature, and the business community reenergized the plan. Specifically,
they adopted the Accelerated Program—a new plan to speed RFS completion by seven
years from the expected finish in 2014 up to 2007, made possible by innovative
financing, earlier availability of funds, and increased highways monies. Figure 1,
“Accelerated Program, January 2000 Life Cycle Certification” displays a map of the
planned corridors and projects for the Accelerated Program as of January 2000. (Sections
and projects due to begin construction or yet to complete construction are indicated by
leading lines or brackets and a ratio such that the numerator indicates the estimated year
of completion and the denominator indicates the anticipated costs in millions.)
sjobergevashenk
6
Figure 1. Accelerated Program, January 2000 Life Cycle Certification
Source: Arizona Department of Transportation, January 2000
Typically, Arizona’s highway construction is planned, developed and implemented in
accordance with a long-range transportation plan that is updated every five years. To
help ADOT and MAG maintain a realistic plan for the Accelerated Program’s
construction schedule, predicated upon available funding, it was programmed on a “Life-
Cycle” basis. In the case of the RFS, the “Life-Cycle Program” concept refers to a
programming approach that includes the usual five-year programming period and also
recognizes the need to forecast and allocate funds through the full life of major funding
sources. As a result, the Accelerated Program Life Cycle was defined to cover the full
period of the Proposition 300 one-half cent tax extending through fiscal year 2006,
construction concluding by the end of 2007. Specifically, the projects of the Accelerated
Program are tracked through 2007 in accordance with the plan specified in 2000, and the
funds necessary to ensure completion are forecasted and allocated accordingly. In
addition, the semi-annual recertification of the Accelerated Program and its progress, in
accordance with its Life Cycle, enables periodic reports to the public on the Accelerated
Program’s progress.
sjobergevashenk
7
Accelerated Program Funding
Since January 2000 through December 2004, the Accelerated Program averaged $639
million a year in new revenues, or approximately $3.2 billion for the entire period.
Although Accelerated Program projects are funded by a variety of sources, approximately
74 percent of the funding comes from the Maricopa County transportation excise tax
(RARF), the Highway Users Revenue Fund (HURF), and the proceeds from innovative
bonds made possible by the dedicated RARF and HURF funding. Additional funding
measures such as the State Infrastructure Bank loans (HELP) and Grant Anticipation
Notes (GANs) comprise approximately 14 percent of available monies. This is displayed
in Figure 2, “Accelerated Program Funding Sources.” More detailed descriptions of each
of the funding sources follow.
HURF
10%
RARF
41%
Bond Proceeds
23%
Other
6%
Federal Aid
6%
HELP/GANS Loans
14%
Figure 2. Accelerated Program Funding Sources 2000-2004
Source: Arizona Department of Transportation, January 2005
The Maricopa County Transportation Excise Tax/Regional Area Road Fund (RARF) –
The one-half cent sales tax approved by the Maricopa County residents in 1985,
specifically for building the Regional Freeway System, flows into the Regional Area
Road Fund (RARF). This excise tax would have ended on December 31, 2005, except
for a recently passed extension through December 31, 2025. Over the past five years,
RARF revenues have averaged approximately $263 million a year.
The Highway Users Revenue Fund (HURF) – Under provisions of Arizona Revised
Statutes Title 28, Sections 6538 and 6540 and State Transportation Policy, Maricopa
County receives a portion of state revenues generated from motor fuel taxes and vehicle
registration fees for the construction of controlled access freeways in the county. In
addition, the State Transportation Board may allocate portions of the State HURF funds
for the Regional Freeway System. Over the past five years, the Accelerated Program’s
sjobergevashenk
8
portion of HURF (and State HURF) revenues has averaged approximately $65 million a
year.
Bond Proceeds – The State Transportation Board (STB) has the authority to issue bonds
backed by a pledge of transportation excise tax revenues or highway user revenues.
Because legislation stipulates how much can be outstanding at any one time, ADOT
determines if outstanding bonds are within the legal limits and if new bonds can be
issued. STB issues bonds as needed to complete the Regional Freeway System. Between
January 2000 and December 2004, bond proceeds averaged approximately $144 million a
year.
Highway Expansion and Extension Loan Program (HELP) — Authorized by Congress
in 1995, State Infrastructure Banks (SIB) operate much like private banks by providing
financial assistance in the form of loans or credit enhancement for transportation projects.
Arizona’s SIB, the HELP fund, was established in 1998. In 1999, Senate Bill 1201 set
total HELP funding at approximately $370 million. STB is also authorized to provide
loans from the HELP fund. Since 2000, the Accelerated Program has averaged
approximately $44 million a year in HELP loan funding.
Grant Anticipation Notes (GANs) — STB also has the authority to issue GANs which
are notes backed by a pledge of future federal funds. This allows the state to use federal
funds earlier and in advance of when they are actually earned, and thus allowing the state
to start projects sooner. This practice of spending money not yet earned through the use
of the GANs is both permissible and encouraged by Federal Highway Administration.
During the past five years, the Accelerated Program has averaged approximately $44
million a year in GANs funding.
Federal Funds — Both ADOT and MAG receive direct federal assistance monies.
ADOT federal aid includes Surface Transportation Projects, or STP, funding which
ADOT assigns directly to eligible projects. MAG receives federal aid including STP
funds but Congestion Mitigation of Air Quality funds as well and can allot up to 70
percent of its federal funding to ADOT transportation projects. Since 2000, the federal
funding of the program has averaged approximately $37 million a year.
Other Income — A portion of the Regional Freeway System is also funded by
miscellaneous income such as interest income, third party billing, and proceeds from
disposition of excess right of way. Third party billing refers to payments from other
entities for various activities of a project like cities’ funds to add enhancements to a
specific project. Other income averaged approximately $41 million a year between
January 2000 and December 2004.
sjobergevashenk
9
The Future of the RFS — the Proposition 400 Excise Tax Extension
In November 2004, Maricopa County voters passed Proposition 400, a 20-year extension
of the transportation excise tax to take effect in January 2006. The extension enables
significant new transportation planning in Maricopa County, including 344 miles of new
or improved RFS highway and freeway corridors. Specifically, of the $8.5 billion in
excise tax revenues expected to be generated by the Proposition, $4.4 billion is
earmarked for RFS highway construction and another $354 million for minor RFS
maintenance projects. In combination with HURF and federal funds, the tax extension
enables new plans for the RFS including additional lanes on most existing corridors, the
creation of new freeways, new or improved traffic interchanges, new carpool (HOV)
lanes, Grand Avenue improvements, application of rubberized asphalt throughout the
system, and a comprehensive computerized freeway management system.
Proposition 400 also includes proposals for new non-RFS initiatives outside of ADOT
management, including arterial and streets development and improvement program, a
substantially expanded regional bus system and new light rail development.
RFS Program Management and Oversight
Building the Roads: RFS Program and Project Management
ADOT is statutorily required to manage the RFS construction. Within ADOT, the
Intermodal Transportation Division (ITD) is responsible for the majority of project
development statewide, including all engineering, construction, and administrative
functions required to advance a project from conception through design and construction,
and finally, into the operation and maintenance of the project. The entire development
process generally comprises four distinct phases—project scoping, design and pre-construction
activities, construction, and operation and maintenance. Collectively, these
phases are known as the project life cycle.
Responsibility for RFS program and project management specifically is shared between
several sub-divisions within ITD’s Valley Transportation Division, and the Right of Way
Group of the ADOT Development Division. The ADOT deputy state engineer, Phoenix
District Construction, Valley Project Management and the head of the Right of Way sub-division
coordinate their efforts in management and oversight of the RFS projects.
Generally, this coordination is accomplished through a single point project management
approach where an assigned project manager from the Valley Project Management Group
has responsibility for managing the budget and timeline and coordinating the
collaboration of specialty expertise, including external consultants, in the project design
and development process. The project manager hands off more authority for the project
at the point of construction to an assigned resident engineer from the Phoenix District
sjobergevashenk
10
Construction Group, though the project manager still remains involved. During the
construction phase, external contractors perform the work of building highways and
freeways, under construction contracts supervised by the resident engineer with some
collaborative input from the project manager. Once a freeway project opens to the
public, ADOT staff from the Phoenix Maintenance District monitor operation of the
project, identify areas where adjustments are warranted and communicate these to the
design and construction staff.
In 1995, ADOT also hired an external general consultant for all Regional Freeway
System projects who is involved in the daily issues of project design or construction and
provides post design services. The general consultant prepares general plans for regional
freeway projects, participates in progress meetings with ADOT, updates project
schedules and cost estimates, generates monthly reports, and reviews and revises costs
using recent bid prices. ADOT also frequently contracts with other external consultants
and contractors to provide professional services for more detailed designs, environmental
studies, or other project tasks.
Deciding How and Which Roads to Build: RFS Oversight
Project and program management oversight is necessary to monitor the progress of the
Accelerated Program and ensure that it is on time for completion by 2007 within the
available funding. Oversight starts internally, at a project management level. The
coordination of efforts between ADOT divisions as discussed above is crucial to the
success of project delivery under this structure. ADOT holds numerous weekly and
monthly project management meetings between the parties involved in the current project
phase to provide this basic level of oversight. For example, the deputy state engineer
holds weekly staff meetings to discuss project status, address issues at hand and discuss
possible solutions. In addition, designated project managers hold semi-monthly project
status meetings.
However, higher level oversight functions are also necessary, and are performed both
within ADOT and externally, in a multi-stage process, specifically involving the Project
Review Board (PRB), the Priority Planning Advisory Committee (PPAC), and two
outside entities, the State Transportation Board (STB) and Maricopa Association of
Governments (MAG).
Project Review Board (PRB) — ADOT provides additional internal oversight through
the PRB, which guides and monitors project progress from the beginning to the end to
ensure that the project managers are making appropriate decisions as to the overall
project delivery. The PRB consists of the deputy state engineer, district operations group
managers, and Statewide Project Management Section managers. The PRB serves as a
mentoring body for project managers and provides assistance to the deputy state engineer
in planning and staffing the highway division program.
sjobergevashenk
11
Priority Planning Advisory Committee (PPAC) — Providing a higher level of oversight,
and still mostly internal, PPAC consists of the ADOT finance director, state engineer,
three deputy state engineers, ADOT planning director, ADOT motor vehicle division
director, ADOT aeronautics director, and chair of the Citizens Transportation Oversight
Committee4 (who is a non-voting member). PPAC reviews and approves all proposed
changes to the Accelerated Program prior to any external review and approval.
State Transportation Board (STB) — STB has statutory authority over the state highway
system. It is comprised of a seven-member board appointed by the governor and
represents six geographical regions throughout the state, each member serving a six-year
term (two members represent Maricopa County). The board sets priorities over the
highway system, approves the Five-Year Highway Construction Program for statewide
projects, reviews and provides final approval for all PPAC approved project or program
budget and time changes, and is responsible for final approval of all RFS projects that
have been prioritized and funded by MAG. Additionally, the board has authority to issue
bonds that can be used to accelerate the completion of transportation projects.
Maricopa Association of Governments (MAG) — MAG is the regional planning agency
for Maricopa County and serves as its metropolitan planning organization. MAG’s
decision-making body—known as the Regional Council—includes elected
representatives from 25 incorporated cities and towns within Maricopa County and the
contiguous urbanized area, the Gila River Indian Community, the Salt River Pima
Maricopa Indian Community, Fort McDowell Yavapai Nation, and Maricopa County as
well as ADOT (represented by the Maricopa County members of STB) and the Chair of
the Citizens Transportation Oversight Committee (CTOC) in ex-officio capacities.
MAG’s Transportation Policy Committee—consisting of MAG members, community
business representatives, and representatives from transit and freight entities, CTOC and
ADOT—collaborates to develop the Regional Transportation Plan (RTP) for the
Regional Council’s approval. The RTP is a long-range 20 year planning document.
Under state statute, MAG prioritizes transportation projects based on qualitative criteria
such as congestion relief, travel demand, and cost effectiveness. The Committee also
prepares a Five-Year Transportation Improvement Plan (TIP) for the Regional Council’s
approval which identifies individual transportation projects and their sources of funding.
The TIP and RTP define ADOT’s responsibilities for RFS construction, to the extent they
are approved by STB.
4 State law provides for the establishment of a Citizens Transportation Oversight Committee (CTOC) in
Maricopa County and charges the seven-member committee with advisory responsibilities in the oversight
of the RFS including consulting with the Arizona Auditor General to define the scope of each performance
audit. CTOC does not have, however, review or approval authorities.
sjobergevashenk
12
Additionally, in 1991 MAG established a material change policy for any changes made
by ADOT to the RFS Program. According to this policy, MAG approval is required for
all changes to RFS project budgets or schedules that would cause:
o An increase in the cost of a project that is more than five percent of the adopted
project budget, but not less than $500,000, or any increase greater than $2.5
million; or
o A time delay of more than three months; or that prevents construction of a
freeway segment by one year beyond the dates on the Certified Regional
Freeway map; or, that delays the start of the project into another fiscal year
(compared to the most recent Life Cycle Report and the Long Range plan (RTP).
Such material changes are forwarded by ADOT to the MAG Transportation Policy
Committee and the MAG Management Committee. Final approval must be granted by
the MAG Regional Council.
Audit Scope and Methodology
Arizona Statutes, Title 41, Section 1279.03 requires the Arizona Auditor General to
conduct periodic performance audits in counties that have a transportation excise tax in
effect. This is the fourth audit related to the Maricopa County transportation excise tax
authorized under Proposition 300 in 1985. The Office of the Auditor General contracted
with Sjoberg Evashenk Consulting, Inc, to fulfill this requirement. The objectives of the
audit were to: (1) assess ADOT’s management performance of the Maricopa County
Regional Freeway System and recommend ways to improve ADOT’s efficiency and
effectiveness in fulfilling its overall responsibilities; (2) review and address statutorily
mandated issues; and (3) review and address other areas of interest, as identified by
stakeholders.
We reviewed federal and state laws and regulations related to transportation, right-of-way
acquisition, financing, and organizational responsibilities. Additionally, we researched
studies conducted by ADOT, others in Arizona, and entities at the federal level on topics
such as the industry’s best practices, alternative transportation, traffic volume and
modeling, and project management.
To understand how ADOT and other key players in Maricopa County’s transportation
network operated, we conducted individual interviews and attended meetings with a
cross-section of relevant parties and interested persons including ADOT, MAG, Regional
Public Transportation Authority/Valley Metro, Citizen’s Transportation Oversight
Committee, and ADOT’s general consultant. We met with the key managers and
decision-makers involved in the highway projects.
sjobergevashenk
13
To establish whether ADOT’s management over the Regional Freeway System was
efficient and effective, we analyzed a variety of documents including monthly project
status and update reports, Life Cycle Certification Reports, and project summary reports.
Additionally, we interviewed key ADOT officials and their staff to identify the tools and
techniques used to manage the progress of the Regional Freeway System and demonstrate
accountability to stakeholders. We attempted to compare baseline time milestones and
cost estimates against completed dates and actual cost data both for the Accelerated
Program overall, and for specific projects. Through interviews and review of monthly
performance reports, we assessed the appropriateness and usefulness of ADOT’s
performance measures used to manage the freeway system. Furthermore, we sub-contracted
with Quincy Engineering, a Transportation Engineering expert, to review and
assess ADOT’s practices in areas such as project management, cost estimating, and right-of-
way acquisition.
With the assistance of our Transportation Engineering Consultant, we also attempted to
ascertain if ADOT would meet the Accelerated Plan’s 2007 completion timeline. To
predict ADOT’s ability to meet this schedule, we evaluated ADOT’s past performance in
meeting internal timelines and critical milestones. Specifically, we selected a sample of
14 projects to evaluate development and construction budgeting and timeline
performance, and a sample of 20 parcels for which ADOT acquired right-of-way to
evaluate timeliness and cost controls (in addition to general compliance with state and
federal statutes and regulations). With our Transportation Engineering Consultant, we
also reviewed two projects in-depth, from the planning phases through the completion of
construction, in order to observe the project development process as well as the adequacy
of costs controls and documentation.
To assess ADOT’s revenue and expenditure practices and its forecast models, we
reviewed audited financial statements, Life Cycle Certification Reports, construction cost
estimate reports, revenue forecasts, cash flow calculations, assumptions behind non-traditional
funding mechanisms, and various management documents used by ADOT.
Additionally, we performed analytical reviews on revenue and cost estimates to evaluate
past performance and project future trends. To assess the reasonableness of cost
estimates, we worked cooperatively with our Transportation Engineering Consultant to
compare ADOT’s cost criteria against other state transportation departments. We also
captured historical data to assess actual expenditures against estimated expenditures at a
summary level. Furthermore, we attempted to evaluate ADOT’s ability to meet cost
estimates—from an individual project perspective—by comparing actual expenditures
against estimated expenditures using our sample of 14 projects.
Finally, we were also asked to review 13 specific areas, including traffic projection issues
and alternative transportation issues. To examine these areas, we performed a variety of
audit techniques and analyzed a variety of documents. Because many of these issues were
sjobergevashenk
14
specific and not necessarily related to our primary reportable issues, we address each
question in Appendix A.
We conducted this audit in accordance with generally accepted government auditing
standards. We limited our review and analyses to those areas described in Audit Scope
and Methodology section of the report. The audit issues resulting from these analyses
were presented and discussed with representatives of ADOT, MAG, and STB prior to
completion of the audit fieldwork.
sjobergevashenk
15
CHAPTER 2
Historical performance indicates that ADOT is likely
to complete the remaining Accelerated Program
projects by 2007.
As of January 2005, the Accelerated Program was approximately 78 percent complete.
ADOT’s performance at managing the funding, design, engineering, right-of-way
acquisition and construction of the network, or the Maricopa Regional Freeway System
(RFS) since 2000 through January 2005, indicates that the department will most likely
complete the remaining 22 percent by the close of calendar year 2007. Specifically, an
analysis of the department’s projected to actual scheduling performance since 2000
shows that ADOT has typically met its goals and/or adequately allowed for slippages
and, further, that the remaining funding projected for the program should be sufficient.
Additionally, we found that ADOT’s project management practices have improved
significantly in recent years and are currently sound and functioning well.
However, we cannot conclude more definitively about whether ADOT will meet all of
the goals for the Accelerated Program by 2007 for several reasons, including the
possibility of unpredictable delays or cost overruns which may be out of ADOT’s control
and the current scheduling which includes some projects that will need to be tightly-managed
to complete on time. Additionally, over the last five years, the scope of the
Accelerated Program has been subject to redefinition every six months.
ADOT’s Performance Since 2000 Supports the Likelihood of
Completing the RFS on Schedule
As of January 2000, the newly adopted Accelerated Program projected completion of
144.1 miles of regional freeway in Maricopa County by 2007, which included 58.2 miles
constructed in the fifteen years since the RFS was originally proposed and adopted in
1985 (at an approximate rate of about four miles constructed per year). As of January
2005, the total projected miles for the RFS had been reduced to 137.9 miles, but 107.6 of
those miles had been constructed. In other words, ADOT had completed 49.4 miles in
the five years between January 2000 and January 2005, at an approximate rate of 9.88
miles a year. With only 30.3 miles remaining to complete before the end of calendar year
2007 (another three years), ADOT appears to be on track. Figure 3, “Accelerated
Program, January 2005 Life Cycle Certification” displays the current map of planned and
completed corridors. (Sections and projects due to begin construction or yet to complete
sjobergevashenk
16
construction are indicated by leading lines or brackets and a ratio such that the numerator
indicates the estimated year of completion and the denominator indicates the anticipated
costs in millions.)
Figure 3. Accelerated Program, January 2005 Life Cycle Certification
Source: Arizona Department of Transportation, January 2005
The status of the miles completed and remaining miles to complete by major RFS
corridor, and by percentage, are displayed in Table 1, “Status of RFS Program Miles by
Corridor, as of January 2005” and Figure 4, “Status of Program Miles by Stage, as of
January 2005”.
sjobergevashenk
17
Table 1. Status of RFS Program Miles by Corridor as of January 2005
Corridor Completed
Under
construction Planned Total Miles
Agua Fria 22 22
Grand Avenue 2.7 1.8 0 4.5
Hohokam 3.1 3.1
Pima 28.2 28.2
State Road 51/Superstition 10.2 10.2
Red Mountain 21.5 2 7.4 30.9
Santan 6.6 18.2 0 24.8
Price 9.9 9.9
Sky Harbor* 2.4 0 0.9 3.3
South Mountain** 1 1
Totals 107.6 22 8.3 137.9
* The remaining 0.9 mile planned for Sky Harbor may be completely withdrawn, depending on a decision
still pending by the City of Phoenix and MAG Regional Council.
**As of January 2005, further development of the South Mountain corridor, 21.1 miles for which are shown
as under study in the current Accelerated Program, will not be funded until implementation of Proposition
400.
Planned
6%
Currently under
construction
16%
Completed
78%
Figure 4. Status of Accelerated Program Miles as of January 2005
Source: Arizona Department of Transportation, January 2005
sjobergevashenk
18
ADOT Generally Appears to Meet its Completion Goals and/or to Adequately
Allow for Slippage
To complete the Accelerated Program, approximately 64 projects are scheduled for
construction between 2005 and 2007, including some major construction scheduled to be
completed by the end of the third quarter of 2007. Most of the 64 projects are already
under construction and of those that are not, most are already in advanced design phases
with any necessary environmental studies already completed or nearing completion. For
a number of these projects, 78 parcels still require the acquisition of rights-of-way.
In a review of the completion estimates compared to actual completion dates for five
construction projects, we found that four were completed on time. (One project was
delayed due to a local agency’s permit issue outside of ADOT’s control.) Additionally,
we discovered in a review of the timeliness of right-of-way acquisition for a sample of 20
projects that ADOT had not consistently met its official right-of-way acquisition goal of
obtaining clearance for use of the property at least two months before the construction
contract is sent to bid. However, in those cases that acquisition had taken longer, it
appeared ADOT had been able to acquire clearance in time to enable construction
completion goals to be met.
In effect, comparisons of the estimated project timeline assumptions for completed
projects in the Accelerated Program against the current status of the remaining projects,
suggest that it is reasonable to expect that the remaining projects will be completed by
2007.
Accelerated Program Costs are Reasonably on Budget
The total RFS project obligations as of January 31, 2005 (including those preceding the
adoption of the Accelerated Program) have amounted to approximately $5.6 billion5. Of
these expenditures:
o $5.2 billion have been spent or obligated for projects that have been completed or
are in progress.
o $389 million has been dedicated to projects yet to commence.
As the focus of this audit was the Accelerated Program, we did not attempt to gauge the
overall budget performance for the RFS since 1985. However, in a comparison of the
total programmed expenditures for the Accelerated Program in ADOT’s Life Cycle
Certification Report of 20006 to the actual spending and remaining amount projected as
of July 2004, we found overall Accelerated Program expenditures to be approximately
5 Source: January 2005 Life Cycle Certification Report. ADOT’s Chief Financial Officer noted that it is
difficult to impossible to determine or confirm the exact costs of the RFS since 1985 because ADOT’s
automated systems are unable to provide reliable data going back to late 1980’s and early 1990’s.
6 The projected expenditures in the January 2000 Life Cycle Certification Report would have included
projections for projects that had been initiated since 1985 that had yet to be completed.
sjobergevashenk
19
seven percent over the original budget. Specifically, in 2000 the Accelerated Program’s
expenditures were budgeted through 2007 at $2.035 billion. In July 2004, the revised
budget set the program’s (actual and projected) expenditures at $2.177 billion—$142
million more, a difference of approximately seven percent. Additionally, an ADOT staff
analysis of budgeted to actual expenditures limited specifically to projects planned and
completed between 2000 and 2004 showed a difference of not even quite one percent.
Due to the highly variable nature of large-scale construction projects, overall, a deviation
below 10 percent between the projections of 2000 compared to the 2004 projections
appears reasonable by industry standards.
Funding Appears Sufficient to Complete Accelerated Program
Available funding for the Accelerated Program is projected on the rate of ADOT’s RARF
and HURF-secured bonds amortization, forecasts of the transportation excise tax and
highway user revenue proceeds, a predictable amount of Federal grants, interest income,
local and state federal funds for specifically programmed projects, and some
miscellaneous income (e.g. from the sale of excess property, rent, etc.). ADOT’s Chief
Financial Officer certifies these projections every six months in ADOT’s Life Cycle
Certification Report.
For internal tracking purposes, ADOT maintains a current cash flow analysis to monitor
and project its available funding through the estimated completion of the Accelerated
Program by the end of 2007. While we were concerned to note that projected
expenditures in this analysis are based on 30 percent design estimates—which as noted
later in the report, we found to be a somewhat unreliable indicator of actual
expenditures—this issue is mitigated by two factors:
o First, a cash flow forecast issued of available funding prepared for the January
2005 Life Cycle Certification Report shows a positive cash balance remaining at
the end of 2007 of over $108 million. Considering that the remaining projected
expenditures from January 2005 through the end of 2007 are approximately $1.4
billion, this leaves a cushion of nearly 7.7 percent. Please see Figure 5, “Total
Available Funding through 2007 (in thousands).”
sjobergevashenk
20
Figure 5. Total Available Funding through 2007 (in thousands)
Source: Arizona Department of Transportation, January 2005
o Second, ADOT, its oversight agencies, MAG, and the STB, require that any
proposed scope and budget changes for Accelerated Program projects be
predicated upon the cash flow analysis. Specifically, they would not allow a
change that exceeded available funding. Further, in the last four years, ADOT has
not had to reject a project change request for budgetary reasons.
Thus, the remaining Accelerated Program appears to have sufficient funding to complete
the remaining projects by 2007.
Project Management Procedures and Processes, While They Could
be Better Documented, are Sound and Functioning Well
We found that the project management model currently being used by ADOT is
appropriate and working well, which supports the likelihood of timely completion of the
Accelerated Program. The level of coordination between project phases and specific
methods of project management align with best practices defined by the Federal High-
Ways Administration (FHWA). Moreover, the process for controlling change orders
appeared sound and rigorous. However, while this issue does not affect the likelihood of
completion, we also noted opportunities for improvement in ADOT’s project
documentation practices and policies.
ADOT Has Improved its Project Management for the Accelerated Program
To better understand the project management process, we asked ADOT to walk us
through the project management documentation and key decision points for two projects,
Remaining available
funding; $108,666;
7.7%
Total projected
expenditures;
$1,419,062; 92.3%
sjobergevashenk
21
one initiated in the 1980’s and one initiated prior to adoption of the Accelerated Program,
but which was nonetheless managed primarily as an Accelerated Program project.
As a result, it became readily apparent to our transportation engineering consultant that
ADOT transitioned from weak and ill-defined formal project management procedures in
the mid 1980’s to a well defined project management system for delivering the
Accelerated Program. For example, during the era of 1986 to 1995, ADOT hired
consultants to deliver entire corridors. However, inadequate controls were in place for
ADOT’s management of such corridors, and both timelines and budgets slipped
significantly. In 1995 ADOT cancelled the corridor contracts and changed their
management model to have a single “general consultant” to better define each project
prior to awarding a design contract and increase the roles and responsibilities of staff in
managing the project’s development. In addition, ADOT developed a Project
Management Process Manual that comprehensively defines the project development
process, the roles of staff in delivering and monitoring projects within corridors, and the
processes for review and approval of proposed changes.
Overall, our transportation engineering consultant found that ADOT has made an
excellent transition from limited project management when the RFS was first initiated 20
years ago to now having significant policies and procedures in place that support a sound
management system.
ADOT Has Nearly “Seamless” Transitioning Between Project Phases
Currently, ADOT applies a team work approach to project management, based upon a
Project Work Plan (PWP) that defines project objectives, the scope of the project,
responsibilities of each functional (technical) unit as well as resources needed to deliver
on the schedule identified. While a design project manager is responsible for
implementing the PWP through the development and design stages and a resident
engineer assumes responsibility for the delivery of the construction project; however, to a
large degree the project manager and resident engineer—as well as other pertinent parties
—work together throughout most of the life of the project.
Specifically, during the development phase the project manager works closely with
ADOT’s general consultant to get a project to a 30 percent design stage prior to awarding
the design contract. The general consultant continues to stay involved through later
design phases, helping to analyze design costs and variations that could result in
repackaging construction segments that might expedite delivery or save money. The
project manager conducts regular meetings of all the key staff or consultants necessary to
develop the evolving design, including those involved in the acquisition of right-of-way,
utility relocation, or environmental studies for the project, local governmental
stakeholders, and later, the consultants responsible for the 60, 95 and 100 percent design
plans.
sjobergevashenk
22
Once a project has reached the 60 percent design stage, the resident engineer becomes an
active participant in the development of the project and begins to participate in all
relevant meetings. Until the construction phase, the project manager retains
responsibility to carry out the PWP including scheduling team meetings, staying within
budget and keeping ADOT and MAG management apprised of the project status.
However, during the construction phase, the resident engineers assumes authority and
responsibility to carry out the construction contract, and the project manager’s role
becomes one more of reporting rather than authoritative7.
The formal project “handoff” between design and construction is done as part of the
“Partnering Meeting” at the initiation of construction. Our transportation engineering
consultant found it notable that the project manager continues to attend safety meetings
with the contractor and otherwise remains involved during construction in order both to
fulfill the project manager’s reporting responsibilities and to provide the continuum of
knowledge of decisions and commitments made during the design phase. In addition,
through this process, the project manager is informed and signs off on contract change
orders even though it is the resident manager, not the project manager, who has the
authority to approve these change orders8.
Our transportation engineering consultant found this degree of coordination impressive
and likely to enable very productive, nearly “seamless” overlap between the phases.
ADOT’s Project Management Style Appears to Meet Industry “Best Practices”
with Regard to “Cradle-to-Grave” Single-point Project Coordination and Multi-disciplinary
Integration
Over the past decade, national trends in the transportation industry have moved more
toward integrated approaches to transportation solutions9, both as they relate to the
inclusion of various stakeholders in project development, as well as with regard to the
phases of project development. Specifically, we found that ADOT’s project management
style conforms to a significant degree to two of the industry’s best practices: “cradle-to-grave”
single-point project management, and the integration of various disciplines and
stakeholders in project development and management.
7 According to our transportation engineering consultant, it would not be possible or desirable for the
project manger, who manages several projects at various stages, to take over the full-time responsibility of
managing any one of those projects through the construction phase; to this extent a single-point project
manager from “cradle to grave” is not truly feasible.
8 As noted later in the report, the resident engineer’s and project manger’s ability to authorize contract
change orders is limited to a certain dollar threshold amount above which progressively more layers of
review and approval are required.
9 As noted in the FHWA’s “Integration and Streamlining Transportation Development and Decision-
Making – State of the Practice Synthesis Report” July 2003.
sjobergevashenk
23
“Cradle-to-grave” Single-Point Project Management
Our transportation engineering consultant was careful to note that considering the size,
complexity, and duration involved in delivering transportation projects, it is probably not
desirable or possible to have a single person assigned to each project throughout all its
phases—from planning through design, construction, operation and maintenance.10
Consequently, he believes that ADOT’s degree of coordination first by the project
manager, and then by the resident engineer, results in a “single point project
management” style, specifically in which projects are overseen from “cradle-to-grave” by
an individual or team of managers. A July 2003 FHWA report cites this type of “cradle
to grave management approach”—one in which “a single person, or team of persons, is
responsible for managing the project from inception to completion”—as having the
following benefits:
o Improved understanding of total costs and impacts of proposed projects
o Providing a central contact for members of the community as well as internal
agency staff on the project
o Enabling timely tracking of concurrent activities and monitoring of the project
schedule
As mentioned earlier, we recognized some of these benefits in play in ADOT’s current
project management structure.
Integration of Disciplines and Stakeholders in Project Development and Management
The FHWA report also states that “in an integrated approach, all disciplines are more
involved in the initial planning and scoping phases when alternatives are developed and
the preferred solution is identified. The increased participation earlier and throughout the
process helps to ensure consensus and minimize potential conflicts.” In keeping with
FHWA best practices, ADOT makes an effort to keep members on the project informed
of the progress throughout the length of the project.
Example 1: Integration of Right-of-Way Division
For instance, since the adoption of the Accelerated Program, it seems as though ADOT
has involved Right-of-Way (ROW) from the inception of the project planning process.
Many states surveyed in 2003 by the FHWA responded that “ROW was not solicited
early enough to be effective under old processes” and since “acquisition is often
identified as the critical path for capital projects, therefore it has been given a heightened
level of attention within the department.” Earlier integration allows ROW “to address
issues and concerns that would otherwise result in increased design and ROW costs as
well as project delays.” Thus, ADOT’s efforts seem to be in-line with the best efforts
identified by the FHWA in other states.
10 ADOT also includes maintenance staff, who begin participating in preconstruction meetings, in its
coordination of projects.
sjobergevashenk
24
Example 2: Integration of local governmental stakeholders
Recently, ADOT’s Communications and Community Partnership Office (CCP) has
become a more significant member of the RFS project management team. Specifically,
CCP staff participate and arrange for the local governmental representatives (or other
affected constituents) participation in project development and construction meetings.
For the last several years, ADOT has included MAG representatives in bi-weekly and
monthly briefings on the RFS. Overall, this project-level involvement helps to ensure
that local stakeholders’ concerns are understood and considered throughout project
implementation. According to the FHWA, “early and continuous communication with
the public is integral to ensuring that a project satisfies the needs of the users.”
ADOT Has a Sound Process for Controlling Change Orders
ADOT’s Project Development Process Manual requires the preparation of project cost
estimates at each stage of the process. We found ADOT’s methods of estimating similar
to ones used in other states with the detail of each estimate improving as the project is
refined. Further, we found that appropriate, industry standard contingencies are added to
in the estimates at each stage to account for the level of detail at that stage.
If a scope, schedule, or cost change is needed before the next stage, ADOT prepares a
change request that includes justification. Depending on the significance of the proposed
change, the review and approval of the request is conducted by various committees,
either internal to ADOT and/or including MAG and the STB. Material changes, for
example, are defined as changes to RFS project budgets or schedules that cause an
increase in the cost of a project that is more than five percent of the adopted project
budget, but not less than $500,000 or any increase greater than $2.5 million. Material
schedule changes are delayed when construction completion is delayed by more than
three months; the construction phase of a segment is delayed by one year beyond the date
on the Certified Regional Freeway map; or the start of the project will occur in a fiscal
year different than shown in the most recent Life Cycle Report and the Long Range Plan.
Material changes require review and approval by several internal ADOT committees
prior to submittal for approval by two outside entities, the STB and MAG.
Smaller changes also have review and approval processes depending on the threshold of
cost increase or time delay and the phase of development in which they are sought. For
example, during the design phase budget changes less than $200,000 may be approved by
the project manager. Changes of over $200,000 are approved by the Design Group
managers and also require the approval of the Project Review Board, an internal
committee of ADOT’s RFS design and construction groups. Changes that exceed the
project budget by $200,000 or 15 percent (whichever is lesser) and projects that change
fiscal years require Project Review Board approval, then the approval of the Priority
Planning Advisory Committee, which is comprised of ADOT executives, including fiscal
sjobergevashenk
25
staff, as well as a non-voting advisory member from the Citizens Transportation
Oversight Committee. Most projects presented to the PPAC for adjustment will also be
forwarded to the State Transportation Board so that it can take formal action to reprogram
the project’s funds.
Changes during the construction phase resulting in new costs of less than $10,000 require
a letter of agreement between the contractor and the resident engineer; while changes of
over $10,000 but less than $50,000 require a formal change order request, they are
approved by the resident engineer who, in addition seeks project manager’s consent on
design changes that are greater than $25,000. The district engineer approves changes
greater than $50,000 but less than $250,000 while a formal change order must be
approved by the project review board following the design phase change request
requirements of over $200,000 or 15 percent of total project budget.11 In other words,
ADOT’s processes generally and appropriately involve progressively more layers of
review as changes become more significant and costly.
Generally, our transportation engineering consultant found ADOT’s process for
controlling change orders to be sound and rigorous enough to support the likelihood that
the Accelerated Program will be completed on time and within available funding.
ADOT Could Improve Documentation Policies and Practices
Despite ADOT’s sound project management and change order controls, we found that
ADOT did not have a uniform system or policies to document project-related detail from
the inception to delivery. For instance, ADOT relied on its general consultant to provide
various reports, rather than maintain in-house data, in order to reconstruct 30 percent
design estimates for the projects we selected for review, and also for the minutes on
design coordination meetings allowing the re-creation of the project development trail.
When we requested the 30 percent design estimates for fourteen projects, ADOT (and its
general consultant) initially could provide estimates for only four of the projects. This
was particularly notable since ADOT asserts that it projects expenditures for the purposes
of evaluating the Accelerated Program’s available funding based on these estimates.
After several weeks, we did receive estimates for the other 10 projects as well; ADOT
staff just had difficulty locating them.
Further, we noted that one project we reviewed had a high variance between the budget
and actual amounts spent ($4,865,000 budgeted compared to $11,183,636 expended).
When we asked about the reasons for this discrepancy, the key information for the budget
changes and justification for these changes was not readily available. While we were
11 For Contract Change Orders (CCOs), ADOT has controls on who provides the authorizing signature for
the change to the contract. For CCOs less than $50,000, the resident engineer may approve; between
$50,000 and $250,000 the construction district engineer must provide the authorizing signature. The deputy
state engineer must authorize CCOs with costs ranging between $250,000 and $500,000; and the State
Engineer authorizes CCOs greater than $500,000.
sjobergevashenk
26
later provided a re-printed unsigned letter which ADOT staff asserted had been sent as
documentation, we were surprised to find that the documentation of the Deputy State
Engineer’s authorization of a budget change of over $500,000 was not more formally
maintained.
Additionally, issues related to documentation and records accessibility were also
addressed in a prior audit12. Specifically, the following recommendation was made:
o Identify additional information to be documented during project development and
construction and who is or should be maintaining the documentation. At a
minimum, documentation should include deliverables and documentation of
significant decisions and actions taken during the course of individual projects.
While these memorialization and documentation retention issues do not impact the
likelihood of the Accelerated Program’s timely completion within remaining funding, we
encourage ADOT to recognize them as opportunities to improve its transparency and
accountability, as well as to facilitate information-sharing in-house on a forward-going
basis. Generally, our transportation engineering consultant agreed that it is good practice
in providing the governmental oversight and management of large-scale construction
programs to ensure that project files be centrally located and include hard copy evidence
that documents all key project milestones and decisions, including adherence to the
protocols for review and approval of change requests (at any level).
A More Absolute Conclusion on Likely Accelerated Program
Completion is Impossible
Despite all indications that the Accelerated Program will be completed on time, we are
unable to conclude definitively that it will be. To begin with, large-scale construction is
frequently subject to unpredictable delays and cost overruns for a variety of reasons.
Workers can strike. Steel prices can suddenly sky-rocket. Concrete can be subject to
sudden shortages. Affected local jurisdictions can suddenly decide to withdraw their
funding portions and approval of design, or catastrophic weather can erase progress or
just delay it beyond expectations. This myriad of potential interruptions to construction
work can disrupt the best-laid plans and exhaust the most conservative contingency
funds. ADOT is not able to completely control for these possibilities—though, as noted,
for the most part we found its systems to be designed to accommodate an appropriate
level of unpredictability.
12 “Performance Audit of the Arizona Department of Transportation: a Review of the Maricopa County
Regional Freeway System,” Sjoberg Evashenk Consulting, July 2000.
sjobergevashenk
27
These uncertainties, coupled with some additional issues regarding the likelihood of
completion described below, affect our ability to conclude unequivocally on the
Accelerated Program’s timely conclusion. Specifically we identified a few issues where
completion may face particularly tighter timelines or budget consideration while ADOT
faces critical staff vacancies. Also, the Accelerated Program has a history of being
subject to redefinition, which could make the definition of “completion” a moving target.
Successful Completion Faces a Few Particularly Tight Timeline and/or Budget
Considerations
Again, while mitigated by a recent history of generally solid performance, ADOT faces
some possible tight spots in its completion of the Accelerated Program. For example, as
of January 2005, ADOT was still working to acquire right-of-way on 78 parcels. As
noted earlier, in the past ADOT has consistently been able to gain clearance to begin
work on needed parcels prior to the scheduled start date of construction, thus preventing
right-of-way acquisition from holding up the construction phase. However, based on our
review of 20 right-of-way acquisitions, on average, obtaining clearance took 21 months,
where 10 months represented the shortest time period and 54 months the longest.
Considering that most construction is due to complete by the end of 2006, if remaining
parcels take as long as the average of our sample from January 2005 to obtain
clearance—which means construction will not be able to commence before mid to late
2006—ADOT will face some particularly tight scheduling in order to stay on track for
completion.
Additionally, as discussed earlier, while ADOT has been able to control program budgets
through a series of semi-annual budget adjustments and revisions, our analysis shows the
Accelerated Program was approximately seven percent over budget overall as of July
2004 when compared to the program budget set in 2000. A more careful analysis of this
number actually reveals widely disparate budget performance between corridors, as much
as 46 percent under budget to 35 percent over budget. The corridors that had the highest
budget overruns are also those still under construction (Red Mountain—nearly 35 percent
over budget, and Santan—approximately 18 percent over budget); much of these budget
increases stemmed from unanticipated escalation in right-of-way acquisition costs. The
bulk of the remaining right-of-way acquisition is for the Red Mountain and Sky Harbor
corridors. (Red Mountain and Sky Harbor are the corridors with major construction
scheduled to complete by the end of 2007.) Sky Harbor is currently more than eight
percent over budget, although it is also on hold at the request of the City of Phoenix.
The current cash flow analysis reveals an ability to accommodate the projected seven
percent increase in the January 2005 budget and still remain within the available funding.
The January 2005 budget for Red Mountain reflects only a 1.2 percent increase in
projected right-of-way costs; no change is reflected in Sky Harbor projected right-of-way
costs. While this does not necessarily indicate that budget overruns for either corridor
sjobergevashenk
28
would prevent successful completion of the Accelerated Program within the available
funding, again, it may indicate the possibility that ADOT will face a challenge of
particularly tight timelines and challenges for any new budget increases within the
remaining funding available.
ADOT Faces Significant Staffing Vacancy Issues
Our transportation engineering consultant stated that ADOT’s current documentation
policies and practices result in a sort of dependence on staff remaining consistent for the
life of project development and construction. ADOT’s current staffing issues, however,
suggests that reliance on staff retention for project continuity may not be a safe approach.
At the time of our review, the Intermodal Transportation Division (ITD), the ADOT
Division with responsibility for the management of highway construction generally and
the RFS specifically, had 249 vacancies in 2,216 authorized full-time positions—a
vacancy rate of approximately 11.2 percent. For the ITD groups most responsible for
delivery of the RFS, the average vacancy rate was approximately 16.5 percent. Please
refer to Table 2, “Significant Vacancies in Critical Department Groups” for a breakdown
of the vacancy rates among these ITD groups or sections.
Table 2. Significant Vacancies in Critical Department Groups
ITD Group or Section
Number of
positions
Number
vacant
Vacancy
rate
Valley Project Management 11 3 27.3%
Phoenix Construction 214 51 23.8%
Phoenix Maintenance 198 22 11%
Right of Way 92 9 9.8%
Totals/average: 515 85 16.5%
Moreover, the turnover rates for critical journey-level engineering classes—from which
project managers and resident engineers are assigned—were particularly high in these
groups. Of 134 vacancies throughout ITD in these classes, 68.7 percent were in sections
or groups responsible for delivery of the RFS.
This not only presents a possible challenge to ADOT’s ability to ensure that when it is
most needed, adequate staffing will be available to provide tighter project management,
but additionally, without comprehensive and detailed project management
documentation, ADOT risks losing the institutional knowledge gained in the
development and construction of the RFS to date as more journeyman level staff move to
private industry and as executive and senior management continue to retire. In order to
continue to ensure successful RFS project development and management ADOT will
need to build from the experiences of the Accelerated Program projects, which may be
difficult, if not impossible, if key staff or management retire before ADOT memorializes
sjobergevashenk
29
and ensures adequate documentation of what is currently held exclusively as institutional
knowledge by these critical employees.
Accelerated Program has Been Subject to Changing Definitions
Every six months, the Accelerated Program budget, funding, and timeline is re-examined
and certified in ADOT’s Life Cycle Certification Report, which memorializes the most
current plan for the program, based on the review and approval of any change requests in
the six months since the prior report, and explains the changes from the last report to the
most current. In effect, the Accelerated Program’s scope, budget, and specific timelines
for completion are publicly redefined every six months. While each new iteration is
consistent with the goal of completion by 2007 within the available funding, to some
degree the Accelerated Program that is due for “completion” becomes a moving target, as
defined by ADOT, MAG, and the STB.
As an example of how the definition of completion has changed, when we examined the
January 2000 Life Cycle Certification Report, we noticed that the Accelerated Program
was projected to include 144.1 miles. As of January 2005, it was projected to include
137.9 miles—a reduction of 6.2 miles. ADOT has provided explanations for the
reductions in the Life Cycle Certification Reports as they occurred, the most significant
of which was the reclassification of 8.8 miles of the South Mountain corridor from
“planned” to “unfunded”—for good reasons, including an on-going environmental impact
study and since further development of this corridor will not be funded until
implementation of Proposition 400. However, when we say that the “Accelerated
Program” is likely to be completed by the end of 2007, we are addressing the 137.9 miles
version of the Program, and not the original program which included the 8.8 miles of the
South Mountain corridor.
Technically, this supports the likelihood of “completion” of the Accelerated Program by
2007 and within available funding; however, the shifting definition of “completion”
presents a dilemma in concluding which “Accelerated Program” will be completed.
ADOT, MAG and STB policy does not assure that what will be completed by the end of
2007 will be the program as currently defined.
sjobergevashenk
30
CHAPTER 3
ADOT’s, MAG’s, and STB’s Efforts at Analyzing the
RFS Program Should be Broadened
Oversight of the RFS is provided collaboratively by the State Transportation Board
(STB), Maricopa Association of Governments (MAG), and ADOT. The Citizens
Transportation Oversight Committee is also charged with review and advisory
responsibilities related to the RFS, but it does not have any authority to approve or
disapprove ADOT plans or proposals. Under Arizona statutes, it is ADOT, MAG and
STB which share the explicit responsibility to deliver the Accelerated Program on time
and within the available funding. Chapter 2 recognizes their success in serving this
responsibility.
However, these agencies also share an implicit responsibility conferred by the public’s
trust to assure the RFS’s cost-efficiency and effectiveness, as also recognized in ADOT’s
strategic planning goals. This chapter addresses opportunities for broadening oversight
practices and systems that would assist in assuring the program’s cost-efficiency and
effectiveness. These include providing a historical review assessing proposed program or
project changes, and consolidating ADOT’s Accelerated Program and project data for
easier tracking and analysis of historical performance.
Since 1985, ADOT has made several improvements to the management of the RFS,
specifically including improved project management processes, controls and
documentation. While nothing in this chapter is meant to convey that the management of
the RFS has not been cost-efficient or effective—or, specifically, that there is necessarily
money or time that could have been saved—it is nonetheless the case that better systems
for holding the program to account for incremental and cumulative budget and timeline
deviations should create new opportunities to learn how to improve RFS management in
the future. The issues raised in this chapter are intended to support ADOT’s value of
“excellence and continuous improvement,” which is also a best practice identified by the
FHWA, and an important goal of all governmental agencies.
Oversight Processes Should Include Historical Review of Projects’
Progress When Evaluating Budgetary or Timeline Revisions
Currently, ADOT, MAG, and the STB serve their responsibility to ensure that the
Accelerated Program is completed on schedule and within available funding through a
sjobergevashenk
31
process of regular review of the status of the program, and any proposed change orders to
specific projects which may affect program delivery overall. This process, however, does
not include historical review of budgetary and timeline changes, or other ways of
assessing ADOT’s long-term cost-efficiency and effectiveness. This evaluative
information may prove useful in establishing best practices or “lessons learned” on
various processes or activities in delivering the RFS, yet would entail little administrative
effort to capture.
Evaluative Information Doesn’t Include Historical Context
MAG and the STB primarily evaluate changes to the Accelerated Program through the
process of reviewing and approving material change requests. In addition, the STB
annually approve one of ADOT’s semi-annual Life Cycle Certification Reports, which is
prepared for the general public and memorializes the most current estimates and budgets
for the program.
The Life Cycle Certification Report provides only a snapshot-in-time look at the
Accelerated Program. While it may address recent changes to the program, its purpose is
not to contextualize them with comparisons to prior, much less original, versions of RFS
budgets, schedules, or scopes. At the time MAG and the STB are asked to approve such
changes, they receive slightly more background and context justifying the need for the
change. However, they also only receive information comparing the most current budget,
scope and schedule to the newly proposed one. They do not receive historical
comparisons of the original budget, scope, and estimate for completion and all of the
changes prior to the most currently proposed. Also missing from the information MAG
and STB receive as support for a requested change or the newly revised Life Cycle
Certification, are analyses of the project’s relative cost-efficiency (such as comparison to
the average cost per mile for ADOT projects of similar types).
Historical Data has Been Limited Until Recently
To a certain degree, ADOT could not have provided this type of historical context or
analysis in support of proposed changes to much of the program until only recently. In
1985, when the original plans and budgets for the RFS were established, ADOT did not
have adequately sophisticated information technology to set up a database or coordinated
databases that could track program and project development, specifically including
deviations from early design estimates, scopes and completion schedules. In 2000, when
the Accelerated Program was adopted, most of the projects and the entire general plan
had been established years earlier. Implementation of the Accelerated Program has
involved initial scoping and development of some specific projects within the context of
the larger plan, but for the most part, early documentation of the original plans for the
majority of the projects completed during the Accelerated Program is simply not
available in formats that would enable easy reconstruction of their complete historical
context.
sjobergevashenk
32
Presently ADOT does have adequate information to provide this type of context for
Accelerated Program projects initiated within the last few years. However, it is simply
that the process of program change evaluation has not been adjusted to provide it.
Expanded Use of Historic Performance Could Provide Useful, Evaluative
Information
MAG reported occasional efforts to evaluate the trends in types of cost increases and
identify opportunities for improving RFS design considerations. Some example results
that were cited included adding the consideration of drainage and utility relocation needs,
as well as the need for wider ramp structures to allow for future ramp expansion.
However, for the most part we did not see dedicated efforts to this type of analysis as part
of the regular oversight processes.
For the purposes of our review, we tried to piece together some historical context for the
Accelerated Program from past Life Cycle Certification Reports. While these data could
provide best practices and lessons learned it may also assist in analyzing budgets or
project costs. For instance, it could help in determining:
• The potential that actual project costs are being understated through the use of a
“system-wide” expenses category and thus may not reflect true degree of
deviation from budget.
• Whether right-of-way budgets are currently not designed to allow a retrospective
analysis of cost increases.
• Whether initial project budgets may not reflect the actual project funding needed.
Use of “System-wide Expenses” Category Understate Actual Project Costs
Every six months, as part of the revision of the Life Cycle Report, ADOT reviews and
adjusts the amounts budgeted for the “obligations” (projected and actual expenditures), in
the “system-wide” category. The total in this category as of January 2005 was
approximately $111.8 million. Expenditures in this category include Freeway
Management System costs (an automated system necessary to control freeway traffic),
system-wide change orders, ADOT staff charges, risk management indemnification costs,
right of way advanced acquisition costs, etc.—all of which ADOT management may find
useful to track separately of design and construction costs. However, a closer look at the
actual expenditures reported in this category, revealed that many were traceable to
specific projects, suggesting that they could have been reported as corridor or project-specific
costs. In fact, every “system-wide” expense we tested traced to a specific
project.
Good business practices and generally accepted accounting practices typically require
costs that can be identified to a project or specific activity be directly attributed to those
sjobergevashenk
33
cost drivers to properly reflect the cost of particular activity or a cost center. While
ADOT may find the system-wide category of obligations useful to capture for its own
internal management purposes, by not identifying and reporting all project-related costs
as charges to specific projects for individual corridors in its Life Cycle Certification
Reports, it may be obscuring true project costs in its representation of the Accelerated
Program’s performance to the public and its oversight agencies. Additionally, unless
ADOT, MAG, and the STB receive reports accurately reflecting the true accounting for
project costs, decision-makers may be foregoing the opportunity to recognize the true
variances from project estimates, may lack information to identify trends, or identify
ways to improve RFS processes.
Right-of-way Budgets Are Not Designed to Allow Retrospective Analysis of Cost
Increases
We also found that there is not a baseline, or otherwise static budget assigned to the right-of-
way costs in project development. Rather, the Right of Way Group manages
acquisition costs against the “current” budgets that are updated semi-annually with the
most recent cost estimates. As a result, budgets for right-of-way increase as estimated
costs and budgets increase. While it is reasonable, even predictable, that real estate costs
appreciate over time and necessitate budget revisions to appropriately account for them,
the lack of comparison to a baseline allows costs to increase period after period without
careful consideration of the whole picture; the floating budget does not provide an
accurate retrospective for assessing if certain cost increases over an extended period were
appropriate.
Project Budgets Appear to be Unreliable Basis for Assessing Remaining Available
Funding
As noted earlier, for the purposes of ensuring that the remaining available funding is
sufficient to cover proposed program changes, ADOT maintains a current cash flow
analysis to monitor and project its available funding through the estimated completion of
the Accelerated Program by the end of 2007. According to ADOT, the projected
expenditures in this analysis are based on 30 percent design estimates. Initially we found
it difficult to obtain the 30 percent design estimates for several projects13, though
eventually documentation of some form was provided for all the projects, in our sample,
we found the deviations between the 30 percent design budget and actual expenditures to
vary from as low as 6 percent to over 205 percent. Moreover, we also found wide
variances in the budget to actual expenditures considering “original budgets” (the project
budget as it is recorded in ADOT’s accounting system). We found under-budget
variances of “original” budgets tp actual expenditures from 100 percent under budget to
130 percent over budget. Some of the projects we selected were still open and accruing
costs, and some were closed. The closed projects were 6.5 percent over budget on
13 ADOT was eventually able to provide all of them.
sjobergevashenk
34
average. ADOT, MAG, and STB may want to take a closer look at how to better
correlate projected expenditures with actual expenditures.
Additional Evaluative Data May Also be Helpful to RFS Oversight
In addition to evaluating the historical context for proposed project changes, and
specifically looking for trends in types of changes, ADOT, MAG, and STB should
develop and identify key performance indicators both for individual projects and the
program overall which are reported as part of any discussion about changes to a project
or the Accelerated Program. Beyond, for example, simply reporting the variance
between a project’s original budget and a proposed budget, ADOT should set a goal for
how much actual expenditures will ultimately deviate from the original budget, and in
presenting the justification for the newly proposed change, indicate whether it may
prevent ADOT from meeting this goal.
Similarly, we reviewed ADOT’s current Performance Measures Reports that captures
several statistics related to project change request characteristics. However, these
measures are not set in any context to ascertain the relative significance or acceptability
of the results; ADOT has not established benchmarks, targets, or objectives for
comparative purposes. For example, one report showed the number and type of “After
Stage Two” change requests considered by the PRB between July 2004 and December
2004, but the report did not indicate expected conditions or acceptability, thus making
these statistics and the overall report less informative and less valuable as a tool for
assessing outcomes. Moreover, while ADOT reported in response to the 2000 RFS audit
that it would develop new measures that focus on cost control, citizen outreach and plan
quality, it still has not adequately developed measures to assess performance and the cost
efficiency and effectiveness of its operations. While it might be difficult to set a fair and
reasonable goal for the number of change requests made for the program overall, setting,
articulating, and tracking the program’s success at meeting performance goals—for
example, delivering projects within 95 percent of the original schedule, or having actual
project costs come within 10 percent of the first design estimate (plus inflation)—provide
evaluative tools for program oversight.
Benchmarks, goals and targets may be difficult to develop, reluctance to set such goals is
understandable, as initially, they may appear arbitrary and or suggest to an external
audience more conclusive than appropriate. Nonetheless, the purpose of setting such
goals is not to encourage internal or external audiences to view failure to meet such goals
as indicators of poor performance, but rather as markers to monitor activities and triggers
for investigating unexpected results. Changes that result in managing using performance
indicators may bring about improvements in estimating or budgeting or design
considerations that provide a greater likelihood that future projects will meet and/or
exceed the goals.
sjobergevashenk
35
Program and Project Data, Currently Residing in Decentralized
Systems, Should be Consolidated
As discussed earlier, for the early years of the RFS, and thus for many of the early
Accelerated Program projects which were underway from as early as 1986, historical data
about original (and/or 30 percent design) budgets, scope, and timelines — as well as
actual costs — is simply not available in easily manipulated electronic formats.
However, we found that the data for projects and aspects of the Accelerated Program
which have come on-line since the mid-1990s is more consistently collected in electronic
form and thus available for a level of analysis not possible for earlier projects. The
complication is that while most of the data that would be needed for ADOT to provide
historical context for newer projects (or projects in the future) is stored in databases or
other electronic files, at this point, they are scattered in several data bases. Specifically,
different pieces of data are often housed in different databases—many without the ability
to “talk” to one another for the purposes of data extraction and analysis—and require
intensive manual manipulation to use for such purposes. Currently, ADOT is in the
process of developing a data warehouse to consolidate various information sources and
software applications.
Data is Currently in a Number of Decentralized Systems
Specifically, we found that each of the several specialty divisions which have some level
of input or responsibility for RFS projects (for example, Right of Way, Phoenix
Construction Group, Valley Project Management, Finance etc.), uses at least one separate
system for tracking certain aspects of a project’s development. While some of these
systems are “compatible” in the sense that they can recognize each other’s data and
update accordingly, most of these systems are “incompatible” and cannot communicate.
In other words, project data in one system cannot be combined with data for the same
project in another system. As a result, ADOT’s various systems and specialty divisions
produce several different reports which may at times be redundant but which, together,
ultimately fill in most of the project development documentation. However, reviewing
any single project’s development—not to mention the entire RFS program’s
development—requires significant manual data manipulation and analysis as well as a
unique level of familiarity with where certain data resides.
As an example of this effect at the project level, we found data from the Right-of-Way
Group difficult to connect with the data from other specialty groups within ADOT for the
purposes of assessing the effects of right-of-way acquisition on projects’ timing and
budgets. In fact, we were warned in collecting data for a sample of projects to expect
inaccuracies, as the data would be compiled from multiple computer systems and
programs. For example, initially we were unable to correctly match parcels of land to
ADOT’s current project identifiers for eight of our sample of 20 projects; subsequently
sjobergevashenk
36
we were provided correct project numbers but it was still necessary to enlist the help of
specific staff members who were familiar with the ways the data correlated.
At a program level, to a large degree this is the method by which ADOT’s semi-annual
Life Cycle Certification Report is compiled. ADOT has no single system capable of
gathering information from various specialty divisions within RFS that is needed to
produce the Life Cycle Certification’s overview of the Accelerated Program’s
development and progress. Rather, ADOT has a full-time dedicated staff member who is
charged with the task of the compilation of data from the following sources: ADOT’s
Finance Group, ADOT’s general consultant, ADOT’s Phoenix Construction Group,
ADOT’s Valley Project Management Group, ADOT’s Right-of-Way Group, the deputy
state engineer who oversees the RFS, and several monthly, bi-weekly, and weekly
meetings regarding specific Accelerated Program projects and overall program
development.
To a certain degree, the need for greater data consolidation was also identified in a prior
audit14 when the following recommendations were made:
o Use a project management system as a tool to monitor costs as part of the project
and track overall program status.
o Fully utilize the project management system by inputting the necessary data so
that reliable reports can be produced in a timely manner. Evaluate its reports to
determine which reports can be eliminated or consolidated with the intent to
reduce duplication of efforts and the number of reports.
To ensure more efficient information gathering, analysis and dissemination throughout
the organization, ADOT should consider how to make its information systems talk to
each other. Specifically, a single system that combined all financial records, technical
and administrative data and information for all projects funded in the RFS program could
serve an important administrative function for the RFS Life Cycle Program and greatly
alleviate the burden of manual staff analysis and manipulation. Until such a system can
be instituted, however, ADOT can still take better advantage of the data currently
available for newer and future projects through multiple systems and sources to provide
historical reviews of project performance as part of the RFS oversight practices.
14 “Performance Audit of the Arizona Department of Transportation: a Review of the Maricopa County
Regional Freeway System,” Sjoberg Evashenk Consulting, July 2000
sjobergevashenk
37
CHAPTER 4
New Phase of RFS Development and Construction
Offers Opportunities to Apply Lessons From the
Accelerated Program
In November 2004, Maricopa County voters passed Proposition 400, a twenty-year
extension of the excise tax which originally created and has helped to fund the RFS —
and which was due to expire at the end of 2005. As a result, in 2006, a new influx of
funding will take effect to meet Maricopa County’s changing transportation needs. The
new MAG Regional Transportation Plan components, made possible by the new funding,
include 344 miles of new and improved freeway and highways along with an ambitious
arterial and streets development and improvement program and new light rail and bus
transit development.
While the streets development and alternative transit components of the new plan are
outside of ADOT’s purview, the further development of the RFS will be subject to the
same program and project management and oversight model as the one currently applied
to the Accelerated Program. Specifically, ADOT will manage a new 20 year RFS
program, overseen by MAG and STB, involving the creation of new highway corridors,
the addition of new lanes to most of the existing corridors, new or improved traffic
interchanges on several existing corridors, installation of a comprehensive computerized
freeway management system, application of rubberized asphalt throughout the system,
and minor maintenance projects. This provides an exceptional opportunity for ADOT,
MAG, and STB to apply lessons learned over the last 20 years, including as demonstrated
by the apparent success of the Accelerated Program, and avoid many of the problems that
plagued the original RFS plan such as funding shortfalls, reduced scope and extended
timelines.
With only two years remaining to bring the Accelerated Program to completion, ADOT,
MAG, and STB may be limited by time to implement many recommendations resulting
from this audit in time to realize their full potential on the Accelerated Program.
However, they will be no less applicable to the new RFS programming, and ADOT,
MAG and the STB should bring forward the successful practices and policies developed
during the Accelerated Program and take the opportunity of new programming to
implement the recommendations for improvement identified in this report.
One of the heralded aspects of Proposition 400 is that it establishes “revenue firewalls”
which require the funding for the different components of the new regional plan to be
sjobergevashenk
38
kept separate. Funding currently earmarked specifically for the RFS, streets, or transit
components cannot be transferred for the purposes of covering shortfalls in one area and
thus inhibit the completion of programming in another area. As the new funding
authorized by Proposition 400 will come on-line prior to the completion of the
Accelerated Program, we also encourage ADOT, MAG, and the STB to take the
additional step of establishing, in effect, a similar “firewall” between the Accelerated
Program and the new RFS programming. Specifically, the successful completion of the
Accelerated Program should entail completion within the remaining available funding
under the original transportation excise tax. Especially with successful completion by the
end of 2007 so seemingly likely at this point, ADOT, MAG, and STB deserve the
recognition of having applied so many lessons from the early years of the RFS to develop
and deliver the Accelerated Program, which will only be possible if it can be clearly
distinguished from the implementation of new funding streams and new RFS plans.
sjobergevashenk
39
CHAPTER 5
Conclusions and Recommendations
Overall, the conclusions drawn from this audit are largely positive. ADOT’s
performance since 2000, and the adoption of the Accelerated Program, suggests the
likelihood that Maricopa County residents will see completion of the Accelerated
Program on time and within the remaining available funding. Further, this appears to be
a function of improved project and program management processes that align with best
practices in the industry and solid controls on change orders instituted by ADOT and its
oversight partners, MAG and STB.
We have identified opportunities for improved management and oversight practices and
processes, specifically with regard to:
o ADOT’s project documentation polices and practices;
o Historical review and additional evaluative information that could be used in
ADOT’s, MAG’s and STB’s RFS oversight processes; and,
o Consolidation of currently decentralized program and project data.
However, improvements in each of these areas would only support ADOT, MAG and
STB’s greater success; none currently pose barriers to the likely completion of the
Accelerated Program. They are identified specifically in support of the strategic values
of “excellence and continuous improvement”—important to all governmental enterprise,
and specifically identified in ADOT’s strategic plan. Because there are only two years in
which they can be addressed for the Accelerated Program, they are also presented as
opportunities for applying “lessons learned” to the implementation of new initiatives
under Proposition 400.
To that end, our recommendations focus on these opportunities for improvement and
additionally recognize the importance of ensuring a “firewall” in the accounting for the
Accelerated Program and new programming made possible by the passage of Proposition
400 (the transportation excise tax extension).
We have addressed our recommendations to particular entities accordingly.
Recommendations for ADOT
1. Continue to improve and implement successful project management practices,
both through the completion of the Accelerated Program and in the
implementation of new RFS programming, including the current change order
review and approval process.
sjobergevashenk
40
2. Develop and implement a memorialization and retention policy for documentation
of approved project changes and key project decisions which enables easy
documentation location and review.
a. ADOT should consider developing a checklist to keep in the centralized
project files that indicates all the types of documentation to be included in
the file, so that at any point, a project file could reasonably be expected to
provide a comprehensive overview of changes to the project and/or other
key project decisions throughout the project’s development.
3. Develop a single database, or a system of coordinated databases, which is capable
of generating reports that track, present, and explain the history of a project’s
incremental and cumulative development including budgeted to actual costs,
timeline and scope changes. Ideally, this system should allow queries and reports
for individual projects, whole corridors, and the Accelerated Program (and/or
Proposition 400 program) overall.
a. Additionally, in the process of establishing a method of retrieving
consolidated data, we recommend that ADOT examine opportunities to
allocate indirect and/or apply direct project costs currently captured as
“system-wide” expenditures for the purposes of Life Cycle Certification
Reporting on corridor-specific obligations.
b. We also recommend that ADOT define and track right-of-way acquisition
budgets and budget changes to watch for opportunities to increase its
ability to anticipate the impact of the right-of-way acquisition process on
overall project budget.
Recommendations for ADOT, MAG and STB
4. Require comparisons of historical budgets and estimated completion dates—and
the memorialized explanations for all prior changes to them—when evaluating
newly proposed changes. Proposed changes should also require the presentation
of impact on key performance indicators established for the RFS program and
other metrics of comparison to enable analysis of cost-efficiency and
effectiveness (e.g. budgeted, estimated and actual costs per mile for similar
projects).
5. Define key performance indicators for the RFS program that will help ADOT,
MAG and STB recognize trends of performance that might trigger greater
analysis for opportunities to improve cost-efficiency and effectiveness. For
example, consider setting and tracking program success at delivering projects
within 95 percent the original schedule, or having actual project costs come
within 10 percent of the first design estimate (plus inflation)—and/or other
indicators, as proposed by ADOT, MAG, and/or STB.
sjobergevashenk
41
6. Require separate tracking, monitoring, and reporting on the completion, including
funding and actual costs, of the Accelerated Program separately of the funding,
costs, and timelines for initiatives resulting from the passage of Proposition 400.
sjobergevashenk
42
Appendix A
Response to Stakeholder Issues
As part of our audit, we reviewed 13 areas of inquiry identified by Arizona stakeholders
and the Arizona Auditor General. Several of these areas were related to our primary
reportable issues, discussed in the body of this report. However, we address each of these
separate topics below.
Statutorily Mandated Issues
1. As required by A.R.S. Section 41-1279.03 (A)(6)(a), review “past expenditures
and future planned expenditures of the transportation excise tax and determine
the impact of the expenditures in solving transportation problems within the
county.” This includes assessing the appropriateness of the expenditures, and
assessing how traffic has been impacted on various highway routes since the
transportation excise tax passed; i.e. miles per hour in 1985 and currently,
percent of person miles traveled by level of service, etc.
Since 1991, ADOT has developed and distributed a Life Cycle Certification report
every six months that reports major accomplishment in building the freeway system
and past and future planned expenditures, including the revenues and expenditures for
projects funded through the Maricopa County transportation excise tax also referred
to as the Regional Area Road Fund (RARF), ADOT’s share of the Highway User
Revenue Fund (HURF) and other local revenues.
To determine the appropriateness of expenditures, we selected fourteen expenditure
items, including right of way, design, construction, utility, and system-wide
expenditures. All expenditures we reviewed appeared appropriate under ARS 41-
1279.03. In our review of the underlying expense support, we were able to conclude
that all of the expenditure items we reviewed were related to the design, construction,
right of way, utility or system-wide charges for the Regional Freeway System
projects.
To determine the impact of the freeways built since the transportation excise tax
passed, we compared traffic projections made in 1993, 1996, 1999 and 2000 to the
actual vehicle counts measured in 2003. Overall, we found that the actual traffic
volume has surpassed the projected vehicle counts. Generally, between 1993 and
1999, the projections were between 17 to 21 percent lower than the actual counts
taken in 2003. However, the projections made in 2000, as compared to the actual
counts in 2003, on the average were seven percent higher than the actual counts.
The increased number of vehicle counts in excess of the projections developed in
1993 validate a concern prevailing among many Maricopa county citizens as well as
sjobergevashenk
43
MAG and ADOT staff that that despite the fact that RFS freeways are being built in
accordance with the Accelerated Program, the increasing population contributes to
more vehicles per household and higher than expected congestion on the freeways.
Over the last ten years, the Phoenix region has shown exponential growth beyond the
1993 estimates. United States Census data shows that exceptional growth is
occurring throughout the southwestern United States. In particular, the Greater
Phoenix population has increased by 59 percent since 1990, compared to the national
rate of only 17 percent.
Further, our review of several MAG studies, including, “2001 Traffic Quality on the
MAG Regional Freeway System,” revealed that due to the rapid population growth in
the area, the RFS freeways are operating at over than the expected capacity levels and
traffic congestion is noted despite the fact that ADOT continues to open more and
more segments of the RFS freeways.
2. As required by A.R.S. Section 41-1279.03(A)(6)(b), review “projects completed
to date and projects to be completed during the remaining years in which the
transportation excise tax is in effect.” Provide a comprehensive listing of all
projects constructed with transportation excise tax monies, projects remaining,
the cost of each project, and the number of miles associated with each project.
As noted previously, ADOT’s Life Cycle Certification report covers RFS
performance during the period from the beginning of the 1986 to 2005. The report
shows revenues and expenditures associated with the program, and describes major
accomplishments on the RFS projects. The information in the Life Cycle report is
supported by project-specific data that reside in various systems such as construction
databases and design consultant’s electronic files to list a few. As required by A.R.S.
Section 41-1279.03 (A)(6)(b), we reviewed projects completed to date and projects to
be completed by the end of 2007. A comprehensive listing of theses projects derived
from ADOT internal data is presented in the Appendix D of this report.
While ADOT does not have a single information system capable of generating a
comprehensive listing of all projects constructed with transportation excise monies,
projects remaining, with costs of each project, and the number of miles associated
with each project, such information is available in parts, in aggregate, or on a project-by-
project basis. We did not test all of the underlying systems used to compile the
Life Cycle Certification Report within the scope of this audit.
3. As required by A.R.S. Section 41-1279.03(a)(6)(c), review, determine, and report
whether the distribution of highway user revenues complies with A.R.S. Title 28,
Chapter 18, Article 2 (Section 28-6531 et seq.), which specifically details the
formula for distributing highway user revenues.
sjobergevashenk
44
Total HURF revenues, as required by Statute, should be distributed in the following
way:
• 50.5 percent to the State Highway Fund; and of this portion, at least 12.6 percent
should be allocated as follows:
o 75 percent to counties with a population over 1,200,000
o 25 percent to counties with populations over 400,000
but less than 1,200,000
• 3 percent to cities with populations over 300,000
• 27.5 percent to incorporated cities and towns
• 19 percent to all counties
Based on the review of the revenue collections documentation provided by the Motor
Vehicle Division and the ADOT revenue distribution records, we determined that
ADOT distributes HURF in accordance with the Arizona Revised Statute Title 28-
6538. ADOT complies with the revenue distribution provisions of this Statute.
Program Management Issues
4. Review and evaluate the process used to recommend and select transportation
projects for funding, as well as whether there is a system in place to reconsider
or revisit project and their priority within the system to allow for changes in
transportation needs in Maricopa County, and identify any recommendations
for improvement.
The Maricopa Association of Governments (MAG) is a Council of Governments that
serves as the Metropolitan Planning Organization (MPO) for Maricopa County and
Apache Junction. MAG provides a regional forum for analysis, discussion and
resolution of issues including areas of transportation, air quality, environment,
regional development and social services.
MAG has the statutory power to review and prioritize projects for the Regional
Freeway as defined in ARS 28-6354. MAG works closely with ADOT on setting the
priorities for the RFS and making any changes (if needed) to the existing project
schedules and budgets. The project priorities for the entire Regional Freeway System
were initially established in 1985. Since the program’s inception, the project
priorities have been reviewed several times, but have not been re-prioritized since
1999.
Project priorities are based on a 20-year traffic projections model that generally fairly
reflects the needs of the MAG growing region. However, due to the exponential
population growth in the area, which increases the demand for the freeways use, the
growing concern remains that the rate of freeway construction can hardly meet the
quickly rising need for more freeways.
sjobergevashenk
45
Nonetheless, we found MAG’s process of prioritizing projects sound. MAG
regularly conducts studies to measure traffic indicators, including transportation
volume studies, such as household surveys, MAG Regional Travel time and travel
speed studies, Phoenix External Travel Surveys, Traffic Quality on the MAG
Regional Freeway System and MAG Regional Congestion studies. It uses these
studies to evaluate the following prioritization criteria:
1. Travel demand
2. Congestion relief
3. Air quality improvements
4. Accident reduction
5. Cost effectiveness
6. Joint funding
7. Social and community impacts
8. System continuity and mobility
9. Establishment of a complete freeway system as rapidly as possible
10. Construction of segments that serve regional needs
11. Construction of segments that provide connectivity with other elements
(Source: MAG Annual report)
We did not identify obvious improvements that could be made to this process.
5. Review and evaluate ADOT’s plan for maintaining the roadways constructed
with the ½ cent sales tax; i.e. pavement preservation, landscaping upkeep, road
maintenance, etc.
According to the ADOT Maintenance Director, the maintenance spending for the
Regional Freeway System has been generally appropriated through the State budget.
Proposition 300, establishing the one-half cent transportation excise tax approved in
October 1985, covers only the construction of controlled-access highways. It makes
no allowances for maintenance.
Currently, ADOT estimates that the average annual costs to operate and maintain a
standard new mile of a 6-lane urban freeway equal approximately $123,400 a year.
Further, ADOT’s long-range planning estimates include an expectation that
maintenance costs per mile increase after the initial four years of highway operation
at a rate of an additional $1,120 per mile per year. ADOT’s maintenance plan
includes several types of activities, including sweeping, landscaping, litter control,
accidents and traffic control, freeway management system, lighting and electricity,
signing and striping, drainage, gaffitti removal and pavement maintenance. With the
passage of Proposition 400, $279 million of sales tax funds are allocated to ADOT for
landscape maintenance and litter control to augment the funding that ADOT already
has for maintenance in the MAG region.
sjobergevashenk
46
6. Determine the average cost per highway mile funded by the ½ cent sales tax in
Maricopa County as compared to other state’s highway programs and/or
national construction cost indexes.
According to our transportation engineering consultant, the nation-wide standards
related to the cost per mile indicators are generally expressed in capital cost per lane
mile. While the capital costs such as direct labor, materials and equipment are
affected by external factors such as cost of living, relative price of the construction
supplies and many others, additional costs such as the right of way, design, utility and
landscape typically fluctuate to a greater degree, when comparing highway
construction costs across different territories and different states.
Based on our review of the capital construction costs for a selected number of
segments on the Regional Freeway System, we found that the cost varied between
$2.38 million to $3.78 million per lane mile. Our transportation expert asserted that
such cost indicators are comparable with the construction cost standards adopted by
CalTrans, where the actual costs per lane mile should be within a $5 million range.
It should also be noted that in April 2004, MAG reported that the total cost per RFS
centerline mile was $39 million. This figure represented all costs associated with the
design, property acquisition, utilities, landscape and construction of the freeway.
7. Update the MAG program features identified in the 2000 performance audit
report.
The MAG program features were updated to indicate progress made since 2000 and
are included in this report in Appendix C.
Traffic Projection Issues
8. Identify methods used by ADOT and MAG to determine areas in Maricopa
County with the greatest transportation needs and review and evaluate these
methods for validity and reliability. For example, if traffic projection models
are used to evaluated transportation projects, are these models statistically valid
and reliable?
To determine the areas in Maricopa County with the greatest transportation needs,
MAG uses a trip based approach, built on a modified industry-standard four-step
modeling process to predict travel demand. The process incorporates data such as
travel characteristics and usage of transit services, as well as various socioeconomic
data (including income, transportation mode preferences, land use, population, and
recreational and work patterns). MAG uses the model’s long range travel demand
forecast output as part of various analyses, including feasibility analysis for transit
capital improvements, evaluations of the impacts of transportation investments, air
sjobergevashenk
47
quality analysis, analysis of travel reduction programs, travel demand management
strategies, and congestion management—all of which are utilized in transportation
plan development.
We found the MAG transportation planning process to be continuously updated and
improved through the conduct and analysis of various travel volume studies,
including MAG regional congestion studies, household surveys, transportation studies
of travel times, travel surveys, traffic volume research and analysis. These studies,
conducted by MAG staff, external consultants hired by MAG, and other local entities,
ensure that MAG’s travel demand forecast modeling process continues to provide a
reasonable representation of current and future traffic conditions and thus more
accurately determine the areas with the greatest need for transportation
improvements.
9. Review and evaluate the latest 20-year traffic projections and the
viability/appropriateness of the model(s) used.
To evaluate the current 20 year traffic projections and the viability and
appropriateness of the model used, we reviewed industry and federal literature related
to traffic modeling and traffic demand projection, developed a general set of criteria
based on the literature, and compared the MAG model to that criteria. Based on this
review and comparison, we determined that the MAG model was consistent with
industry criteria, was viable and appropriate, and thus, that the current 20 year
projections were reasonable.
Specifically, MAG’s modeling process was based on the widely used trip-based
approach, four-step travel demand forecasting method that included a majority of the
input data identified by industry literature. Further, MAG’s modeling process
included interim and final output calibration/validation techniques developed to
ensure the model generated reliable projections; the calibration/validation results
generally met or exceeded those identified in industry literature. Additionally, MAG
had a process of continually improving the model to ensure it remained sensitive to
changes in input data and produced accurate projections.
Right of Way Issues
10. Compare and contrast Arizona’s state laws regarding transportation right of
way issues and standards of appraisal with Federal laws regarding
transportation right of way and criteria for appraisals.
To compare and contrast Arizona’s state laws regarding transportation right of way
issues and standards of appraisal with federal laws and regulations, we reviewed,
compared, and contrasted the relevant Arizona Revised Statutes, federal statutes, and
Code of Federal Regulations as well as the ADOT Right of Way Group’s Procedures
sjobergevashenk
48
Manual. Based on this review and comparison, we did not note any discrepancies
between Arizona’s state laws and federal laws and regulations related to
transportation right of way or standards for appraisals. Further, ADOT’s right of way
acquisition process appeared to be consistent with both state and federal laws
requiring fair market value appraisals, negotiations with property owners, and
condemnation proceedings if, or when, necessary.
11. Review and evaluate ADOT’s efforts to preserve the transportation corridors
needed for Maricopa County Regional Freeway System.
To review and evaluate ADOT’s efforts to preserve the transportation corridors
needed for the Regional Freeway System, we interviewed key executive and
management level staff including the deputy state engineer over the Intermodal
Transportation Division (responsible for the highway development process), the chief
Right of Way agent, and the assistant chief Right of Way agent as well as reviewed
relevant internal procedural documents related to right of way. Based on the
interviews and review of documents, we determined ADOT efforts to preserve
transportation corridors was reasonable.
Specifically, although a majority of the “corridors” for the RFS had already been
acquired and constructed upon, we were informed most were designed and built using
a flexible and expandable ultimate route concept. In other words, most of the RFS
projects were designed and built with the ability to expand capacity by opening a
closed median or paving a shoulder, which “preserved” future expansion corridors.
Additionally, for the preservation of upcoming projects, ADOT continued to use the
more successful historical practices to preserve right of way. Specifically, the Project
Management Section continued to utilize a Red Letter coordinator who worked with
local agencies in the “Red Letter” process. Further, ADOT continued to work with
local developers planning projects in, next to, or near the RFS right of way to
minimize the impact of the highway on the development and the development’s
impact on the Regional Freeway System.
12. Review a sample of ADOT’s prior purchases of right of way for the Maricopa
County Regional Freeway System and compare what was actually paid for the
land versus what the land’s fair market value was at the time of purchase. If
possible, comment on what influence the planned highway project had on the
price paid for the land purchased for right of way and whether the method used
to determine the purchase price complied with Arizona law.
To review a sample of right of way acquisitions, we obtained and reviewed a universe
of acquisitions between January 1, 2000 and December 31, 2004 classified by
corridor, which included appraisal values, acquisition prices, and other relevant
statistics such as size of acquisition. We selected a sample of acquisitions from the
universe and reviewed ADOT’s Right of Way Group’s files for each acquisition.
sjobergevashenk
49
Based on our review of files, we determined ADOT generally paid Fair Market
Value—or slightly more—for its acquisitions and the determination of purchase price
complied with Arizona law.
Specifically, ARS 28-7091 indicates fair market value is the most probable price for
which a property would sell in the open market. Further, the Federal Highway
Administration (FHWA) Right of Way Program Development Guide noted an
appraisal could be used to determine an approximate fair market value. Using the
FHWA concept to determine if fair market value had been paid, we reviewed right of
way purchases in total and noted the average variance between acquisition price and
appraisal value was $26,890, or approximately 24 percent more than the average
appraised value and the overall average variance between judgment price
(condemnation) and appraisal value was $550,071, or nearly 61 percent more than the
appraised value. In our sample of 20 acquisitions, we found that ADOT acquired 4
properties for approximately the appraised value (within 5.6 percent of the appraisal
value); 2 properties for less than the appraised value; and the remaining 14 properties
above the appraisal value.
Alternative Transportation Issues
13. What percent or amount of the transportation excise tax monies has gone into
funding alternative modes of transportation since year 2000, and what
specifically has the money funded since 2000?
According to ARS 28-6305, ADOT is required to transfer $5 million of the excise
sales tax monies each fiscal year to the Public Transportation Authority fund and
adjust the distribution by the annual percent change for the previous calendar year in
the “GDP price deflator” as defined in ARS 41-563. In 2001 ADOT’s annual
distribution to the Regional Public Transportation Authority (RPTA) was $7.19
million, which was approximately 2.7 percent of the excise tax monies. Although the
total amount distributed to RPTA in 2005 increased to just over $7.71 million, it was
still only 2.5 percent of the excise tax monies received by ADOT. Further, the RPTA
used these excise tax monies to fund alternative modes of transportation, although
some of the excise tax money funded administrative and overhead expenses. A
majority of the excise tax money—65 percent or more of the allocated amount in each
of the fiscal years—was budgeted and spent on projects such as fixed route transit
services and community funded transportation.
sjobergevashenk
50
Appendix B
Status of 2000 Performance Audit Recommendations
Recommendation
Fully
Implemented
Partially
Implemented
Not
Implemented
No Longer
Appropriate
1. Clearly define the roles, responsibilities,
and accountabilities of all members of a
project team. Specifically,